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Dow Jones Industrial - Extra Big Declines in the Second Quarter 
(1)
DJIA.AWednesday, April 28, 2010
By Gibbons Burke
The Dow Jones Industrials ended a six-day rally streak by dropping an 'extra big' 1.9% on Tuesday after making a new 52-week high on Monday - something that's never happened before. The average closed at 10991.99 down a 'very large' 1.1% in five days, with an 'extra large' daily high-low range. This is a day of superlatives. The longer-term uptrend is still intact, with the average closing above the 200, 100 and 50-day averages, but this drop took out the 20, 10 and 5-day averages in one fell swoop. What's likely to happen next, using history as a guide?
Q: How has the Dow performed in the past when it has seen an 'extra big' (three standard deviation) percentage decline in the second quarter of the year, yet closes above its 200-day average price?
A: According to the 14 previous occurrences of this event, EventEdge indicates that DJIA.A has shown a strong bullish edge that peaks 37 trading days after the event. Thus, the projected date for the peak of the bullish edge relative to the current event date (Tuesday, 27 April 2010) is Thursday, 17 June 2010. DJIA.A rallies in 93% of the cases (13 of 14) by an average of 6.4% relative to the close on the event date. The average of the 1 decline is -5.5%. The overall return of the 14 cases is 5.5%, which, based on the close of DJIA.A on the event date (10991.99), provides a target price of 11596.55.
The last time this event occurred was in 1995, and the history of these events stretches as far back as 1901. Interestingly the last three occurrences of this event all showed -1.9% declines, exactly.
Click here2 to investigate this trading idea further in EventEdge®.
Gibbons Burke3 is editor of MarketHistory.com.
Related Ideas:
- Dow Jones Industrial Average - Terrible Tuesday4 - April 28, 2010
- S&P 500 Index - Commitments of Traders5 - April 27, 2010
 |
Let variable values:
@ = DJIA_ACT
theEvent = IF
Date is second quarter
AND
1 value percent_move of @ is less than
(30 day average of 1 value percent_move of @ -
(3 * 30 day std_dev of 1 value percent_move of @
)
)
AND
@ is more than 200 value average of @
THEN 1
ENDIF
Date Day t t+1 t+7 t+25 t+37
05/08/1901 Wed -4.4 -6.1 1.9 7.8 7.5
05/27/1918 Mon -3.6 -0.3 0.4 4.2 4.7
06/03/1919 Tue -2.9 1.8 1.2 6.4 6.0
06/12/1922 Mon -3.1 1.4 2.5 6.4 6.7
04/25/1927 Mon -2.2 0.8 2.6 5.6 3.9
04/02/1928 Mon -2.4 0.3 1.3 5.1 3.9
05/22/1929 Wed -4.2 2.4 1.1 9.3 14.4
04/09/1943 Fri -3.2 0.0 1.4 4.4 8.8
06/20/1946 Thu -2.5 1.3 3.0 -1.4 2.0
06/26/1950 Mon -4.7 -0.8 -1.4 -1.0 1.8
06/08/1954 Tue -2.1 -0.5 1.9 6.1 8.4
05/17/1965 Mon -1.0 -0.0 -1.5 -5.9 -5.5
04/07/1992 Tue -1.9 -1.0 4.8 5.6 6.2
05/18/1995 Thu -1.9 0.0 0.9 5.6 8.9
04/27/2010 Tue -1.9 NaN NaN NaN NaN
Avg -2.8 -0.0 1.4 4.2 5.5
AvgPos NaN 1.0 1.9 6.1 6.4
AvgNeg -2.8 -1.4 -1.4 -2.8 -5.5
PctPos 0.0 57.1 85.7 78.6 92.9
PctNeg 100.0 42.9 14.3 21.4 7.1
Maximum -1.0 2.4 4.8 9.3 14.4
Minimum -4.7 -6.1 -1.5 -5.9 -5.5
StdDev 1.1 2.0 1.6 4.1 4.6
ZStat -2.6 -0.0 0.9 1.0 1.2
Variance 1.1 4.0 2.7 16.9 20.7
15 Occurrences |
Comments:
Web Address of this trading idea:
Links:
2 http://www.markethistory.com/content/events/stocks/chart.html?ticker=DJIA.A&events=quarter,DownXXL0,AboveSMA2000
3 http://www.markethistory.com/staff/detail.html?s=gibbons
4 http://www.markethistory.com/content/content.html/16848.html
5 http://www.markethistory.com/content/content.html/16847.html