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Bearish Reversal in Stocks - Bullish for Bonds 
CBT.USTuesday, June 22, 2010
By Gibbons Burke
The Nasdaq Composite index (COMP) opened the week on Monday morning up a 'big' 1.4% relative to Friday's close, but then spent the whole day taking it all back until it closed at 2,289.09, down 0.9% on the day, forming a 'trend day' bearish reversal pattern. The S&P 500 Index (SPX), the Dow Jones Industrial Average (DJIA) and the Russell 2000 Index (RUT), also formed similar patterns. How has this affected the bond market in the past?
Q: How have 30-year Treasury Bond futures (CBT.US) performed in the past when the Nasdaq Composite and the Russell 2000 indexes have seen a Bearish Reversal pattern, where a higher high is followed by a close lower on a Monday?
A: According to the 21 previous occurrences of this event, EventEdge indicates that CBT.US has shown a somewhat bullish edge that peaks 7 trading days after the event. Thus, the projected date for the peak of the bullish edge relative to the current event date (Monday, 21 June 2010) is Wednesday, 30 June 2010. CBT.US rallies in 81% of the cases (17 of 21) by an average of 1.6% relative to the close on the event date. The average of the 4 declines is -0.7%. The overall return of the 21 cases is 1.1%, which, based on the close of CBT.US on the event date (124'18), provides a target price of 125'41.
This is a redux story which we have published on several previous occasions, most recently in 2004. See the related ideas links below.
Gibbons Burke2 is editor of MarketHistory.com.
Related Ideas:
- Stocks and Bonds - Reversal of Fortune3 - December 21, 2004
- Nasdaq & Russell - Monday Bearish Reversals4 - February 3, 2004
- Key Reversals - Stocks and Bonds5 - December 16, 2003
- Bearish Stocks, Bullish Bonds6 - July 24, 2001
- NASDAQ and the Long Bond7 - April 11, 2000
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Let variable values:
@ = US
theEvent = IF ReversalBear ( NASD )
AND
Date is Monday
AND ReversalBear ( RUT )
THEN 1
ENDIF
Date Day t+4 t+6 t+7 t+8 t+9
06/05/1989 Mon 2.5 1.6 2.1 1.0 0.8
06/19/1989 Mon 2.1 3.2 2.7 3.3 3.7
08/21/1989 Mon 0.0 -0.2 -0.1 -0.2 0.6
09/25/1989 Mon 0.6 1.2 1.5 2.3 3.2
11/20/1989 Mon 0.1 -0.1 0.3 0.5 0.6
04/18/1994 Mon 2.1 3.1 1.3 1.1 1.0
11/20/1995 Mon 0.4 0.6 1.4 1.9 2.8
03/25/1996 Mon -1.2 -0.4 -0.6 -1.0 -3.0
11/30/1998 Mon -0.0 0.4 0.8 0.8 0.1
01/24/2000 Mon 2.8 2.8 3.5 4.5 4.2
04/10/2000 Mon -0.9 -2.3 -1.4 -1.3 -1.7
07/23/2001 Mon 0.1 0.6 0.4 -0.2 -0.3
03/03/2003 Mon 0.3 0.6 0.9 -0.6 -0.3
12/15/2003 Mon 1.5 0.3 1.0 1.6 0.6
02/02/2004 Mon 0.9 0.8 1.6 1.1 1.4
12/20/2004 Mon -1.0 -1.2 -0.6 0.0 0.1
11/14/2005 Mon 1.0 1.5 0.9 1.4 1.8
02/05/2007 Mon 0.2 -0.1 0.7 0.9 1.1
02/26/2007 Mon 0.9 0.9 1.2 1.1 0.3
11/10/2008 Mon 0.8 2.1 3.8 6.9 7.4
03/16/2009 Mon 3.7 3.6 2.6 3.2 3.2
06/21/2010 Mon NaN NaN NaN NaN NaN
Avg 0.8 0.9 1.1 1.3 1.3
AvgPos 1.2 1.6 1.6 2.0 1.9
AvgNeg -0.8 -0.7 -0.7 -0.7 -1.3
PctPos 81.0 71.4 81.0 76.2 81.0
PctNeg 19.0 28.6 19.0 23.8 19.0
Maximum 3.7 3.6 3.8 6.9 7.4
Minimum -1.2 -2.3 -1.4 -1.3 -3.0
StdDev 1.3 1.5 1.3 1.9 2.2
ZStat 0.6 0.6 0.9 0.7 0.6
Variance 1.6 2.2 1.7 3.7 4.9
22 Occurrences |
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