After a Big SPY Win Streak, What's Next for Stocks?

After its big three-day win streak, can traders look forward to more gains from the SPDR S&P 500 ETF Trust (SPY)?

Feb 19, 2016 at 2:44 PM
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This past Wednesday, Feb. 17, marked the third consecutive session where the SPDR S&P 500 ETF Trust (SPY) closed on a gain of 1.5% or more. That's a pretty impressive accomplishment; according to Schaeffer's Senior Quantitative Analyst Rocky White, SPY win streaks featuring consecutive daily gains of that magnitude have happened only three other times since 1993. So, what can traders expect from stocks after this big breakout streak from SPY?

Over the short term, SPY tends to easily outpace its average returns. In fact, two weeks after this particular variety of SPY win streak, the exchange-traded fund (ETF) is positive 100% of the time, with an average return of 4.25%. For comparison, the average two-week SPY return since 1997 is 0.25%, and positive only 58% of the time.

SPY win streak 0219


Of course, three data points isn't exactly a broad sample size. To expand our view, Rocky ran the numbers to see how SPY fares following three days of 1% gains -- which yielded 15 occurrences.

Unfortunately, this data set isn't as unequivocally bullish. Two weeks following such a signal, SPY is positive only 33% of the time, with an average return of negative 0.16%.

Looking out a little further, the returns are somewhat more encouraging for stock market bulls. Over the next one-month and two-month periods, SPY is positive two-thirds of the time, with an average one-month return of 1.30% -- which easily surpasses the "anytime" one-month return of 0.52%.

However, the mean two-month return drops to 0.17%. This suggests that, despite the preponderance of positive returns over this time frame, there have clearly been some big SPY losses over this period that have skewed the average lower.

SPY win streak 2 0219


 

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