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Ten-year Treasury Notes - Three Days of Strength 
CBT.TYWednesday, November 19, 2008
By Gibbons Burke
The Ten-year Treasury Note futures market (CBT.TY) has been surging, with the front contract (December) experiencing a 'big' one-day rally on Tuesday after a gap open and following rallies on Friday and Monday. The contract closed at 118 30/64, up a 1 and 1/64 on the day, or a 'big' 0.9%. The market closed above its upper Bollinger band, which many think may be a sign the market is overbought and due for a corrective decline. Commitments data reports that Hedgers in the market (smart money) is net long, while Small Traders are net short of open interest in the market. What does history suggest?
Q: How have Ten-year Treasury note futures performed in the past when it has rallied three days in a row, with the third day a 'big' move on a gap open which closes above the upper Bollinger band, when Hedgers are net long and Small Traders are net short?
A: According to the 13 previous occurrences of this event, EventEdge indicates that CBT.TY has shown a somewhat bullish edge that peaks 36 trading days after the event. Thus, the projected date for the peak of the bullish edge relative to the current event date (Tuesday, 18 November 2008) is Monday, 12 January 2009. CBT.TY rallies in 77% of the cases (10 of 13) by an average of 3.4% relative to the close on the event date. The average of the 3 declines is -1.4%. The overall return of the 13 cases is 2.3%, which, based on the close of CBT.TY on the event date (118'30), provides a target price of 121'12.
Gibbons Burke2 is editor of MarketHistory.com.
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Let variable values:
@ = TY
theEvent = IF
1 value percent_move of @ is more than
(30 day average of 1 value percent_move of @ +
(1 * 30 day std_dev of 1 value percent_move of @
)
)
AND
2 values ago {
1 value move of @ is more than 0 }
AND
1 value ago {
1 value move of @ is more than 0 }
AND GapBull ( @ )
AND
@ crosses above bollinger_high ( @, 20 units, 2 )
AND
The weekly CoTCHL of @ 1 week ago - The weekly CoTCHS of @ 1 week ago is
more than 0
AND
The weekly CoTSTL of @ 1 week ago - The weekly CoTSTS of @ 1 week ago is
at most 0
AND
@ is DEFINED
THEN 1
ENDIF
Date Day t t+5 t+20 t+30 t+36
02/14/1986 Fri 1.1 2.0 5.8 8.3 9.2
06/14/1988 Tue 1.6 -2.5 -2.8 -2.8 -1.6
09/02/1988 Fri 1.6 0.5 1.4 1.8 1.6
10/01/1990 Mon 0.7 0.2 0.2 2.2 2.6
01/25/1993 Mon 0.5 0.9 3.7 3.6 3.1
09/27/1993 Mon 0.8 -0.1 -1.0 -2.1 -1.5
01/27/1995 Fri 0.9 0.9 2.5 3.0 3.0
05/04/1995 Thu 0.6 1.0 4.4 3.7 4.2
09/24/1999 Fri 0.6 -1.5 -2.8 -0.7 -1.2
06/14/2002 Fri 0.7 0.1 1.4 2.3 3.6
08/02/2002 Fri 1.0 0.3 0.9 2.7 3.9
12/27/2002 Fri 0.7 -1.6 -0.8 -0.6 0.6
04/15/2005 Fri 0.5 0.1 0.9 1.5 2.4
11/18/2008 Tue 0.9 NaN NaN NaN NaN
Avg 0.9 0.0 1.1 1.8 2.3
AvgPos 0.9 0.7 2.4 3.2 3.4
AvgNeg NaN -1.4 -1.8 -1.5 -1.4
PctPos 100.0 69.2 69.2 69.2 76.9
PctNeg 0.0 30.8 30.8 30.8 23.1
Maximum 1.6 2.0 5.8 8.3 9.2
Minimum 0.5 -2.5 -2.8 -2.8 -1.6
StdDev 0.3 1.2 2.6 2.9 2.9
ZStat 2.5 0.0 0.4 0.6 0.8
Variance 0.1 1.5 6.8 8.3 8.5
14 Occurrences |
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2 http://www.markethistory.com/staff/detail.html?s=gibbons