V.12:10 (433-437): The DJIA And The Stock Index Futures Cycle by Christopher Cadbury
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The DJIA And The Stock Index Futures Cycle by Christopher Cadbury
Do phases of the three-month futures cycle usually coincide with periods of greatest weakness or periods of substantial strength in the stock market? This American Stock Exchange trader details DJIA performance in relation to the beginning trading periods for the lead stock index futures contracts.
Stock index futures expire on the third Friday of March, June, September and December. The three-month period between expiration dates is known as the three-month futures cycle. Declines in the Dow Jones Industrial Average (DJIA) of at least 104 points have usually started in one brief phase of the futures cycle; often, the declines are much greater than 104 points. In fact, six of the eight declines of 200 points or more since October 1987 began during the short phase. The other two declines of 200 points or more were, respectively, a test of the 1987 crash lows and a drop that started earlier but resumed its downward course during the phase. After the drop resumed, the market fell 303 points.
For six of the eight declines of 200 points or more that started during the phase, the loss was 2,489 points in total. The total loss of all the declines of at least 104 points beginning in the phase since October 1987 was 5,087. Clearly, 5,087 points are many more than are in the current market. All the declines of 104 DJIA points or more resulted in rebounds of 68 points or more. In general, however, the rebounds have been much larger. The gains that occur from 200-point losses or more have always been at least 100 points or the normal Standard & Poor's 500 equivalent of 100 DJIA points, 12 S&P points.
Do phases of the three-month futures cycle usually coincide with periods of greatest weakness or periods of substantial strength in the stock market? This American Stock Exchange trader details DJIA performance in relation to the beginning trading periods for the lead stock index futures contracts.
Stock index futures expire on the third Friday of March, June, September and December. The three-month period between expiration dates is known as the three-month futures cycle. Declines in the Dow Jones Industrial Average (DJIA) of at least 104 points have usually started in one brief phase of the futures cycle; often, the declines are much greater than 104 points. In fact, six of the eight declines of 200 points or more since October 1987 began during the short phase. The other two declines of 200 points or more were, respectively, a test of the 1987 crash lows and a drop that started earlier but resumed its downward course during the phase. After the drop resumed, the market fell 303 points.
For six of the eight declines of 200 points or more that started during the phase, the loss was 2,489 points in total. The total loss of all the declines of at least 104 points beginning in the phase since October 1987 was 5,087. Clearly, 5,087 points are many more than are in the current market. All the declines of 104 DJIA points or more resulted in rebounds of 68 points or more. In general, however, the rebounds have been much larger. The gains that occur from 200-point losses or more have always been at least 100 points or the normal Standard & Poor's 500 equivalent of 100 DJIA points, 12 S&P points.
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