What Happens After a Six-Week S&P Win Streak?

The Dow and S&P 500 tend to outperform in the aftermath of a six-week win streak

by Alex Eppstein

Published on Nov 11, 2015 at 1:47 PM

It's not been a particularly good week for U.S. markets, and things aren't any better today. However, it's worth noting that the major benchmarks -- specifically, the blue chip Dow Jones Industrial Average (DJIA), the broader S&P 500 Index (SPX), and the tech-heavy Nasdaq Composite (COMP) -- are each coming off a sixth consecutive week of gains.

With that in mind, Schaeffer's Senior Quantitative Analyst Rocky White ran the numbers to determine what history suggests about market performance following similar hot streaks. From the looks of it, this week's weakness represents a break from the trend, as six-week win streaks tend to be a bullish signal in the short term.

Below, you'll see two charts on the Dow -- the first showing its post-signal performance across four time frames, and the second showing its anytime performance. As you can see, the bellwether has averaged a 0.2% gain in the week after its past 20 six-week win streaks, with 60% positive -- each in line with its anytime performance. Going out to eight weeks, the Dow's post-signal outperformance becomes clear. Specifically, the index's average advance of 2.1% outstrips the anytime gain of 1.6%, and its percent positive of 75% tops the typical 64%.

151111dowwinningstreaks

Turning to the SPX, the post-signal outperformance is consistent across all time frames. The difference in two-week returns is especially pronounced, as the benchmark averages a 0.7% gain versus an anytime uptick of less than 0.4%. It's also worth noting that following six-week win streaks, the standard deviation on both the Dow and S&P is lower than usual -- as investors grow complacent amid a bullish market, yielding less volatility.

151111spxwinningstreaks

That lower-volatility trend mostly holds up on the COMP, until you get out to eight weeks, where the post-signal standard deviation of 10.7% eclipses the average of 9.1%. In terms of performance, the Nasdaq provides a more mixed picture than its peers. Specifically, the COMP's average return in the next- and two-week windows is better than its anytime returns, but worse in the four- and eight-week time frames.

151111compwinningstreaks


A Schaeffer's exclusive

TOP STOCK PICKS 2020

Access your FREE insider report before it's too late!


 
 

Partnercenter


NEW! Explore Schaeffer’s Partners' deals and get connected to top online brokerages with deals tailored exclusively for our readers.  Get answers to your questions regarding transfer fees, commission rates, programs and available discounts related to online trading services.

MORE | MARKETstories


IRA/401k: The Crash-Proof Retirement Plan
Use gold to protect any IRA, 401(k), or retirement account from a looming financial crisis.
Stocks Eye Notable Weekly Gains on 3-Day Surge
Stocks are eyeing big weekly gains
WW Stock Brushes Off Bull Note
Morgan Stanley upgraded the Weight Watchers parent to "overweight" from "equal weight"
IRA/401k: The Crash-Proof Retirement Plan
Use gold to protect any IRA, 401(k), or retirement account from a looming financial crisis.