How the Dow and Nasdaq Just Made History

The Dow Jones Industrial Average (DJIA) and Nasdaq Composite (COMP) are going their separate ways, and making history

Aug 2, 2016 at 11:24 AM
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The Dow Jones Industrial Average (DJIA) is on pace for its seventh straight daily loss, cooling off after a string of record highs. However, the tech-rich Nasdaq Composite (COMP) just notched its fifth straight daily win, thanks to a string of solid earnings from several tech heavyweights. According to our analysis, this divergence is making history.

We have never seen one of the indexes up five straight sessions while the other endures a simultaneous five-day losing streak, according to Schaeffer's Senior Quantitative Analyst Rocky White. In fact, a four-day Dow winning streak at the same time as a COMP losing streak has never happened. We have, however, seen the Nasdaq enjoy a four-day stretch higher while the Dow fell for four straight, but that hasn't happened since January 2000, and before that you'd have to go back to the 1980s.

As you can see on the charts below, the signal in 2000 preceded an ugly short-term stretch for the Dow, with the index in the red at one-week, two-week, one-month, and three-month checkpoints. The COMP, meanwhile, had a bumpy ride, dropping 8.2% in the week after the signal, and then recovering somewhat before logging a three-month loss of nearly 14%. The first signal, in 1979, preceded a relatively flat month for both the DJIA and the COMP, but heavy losses occurred on a three-month basis. On the other hand, both divergences in the 1980s marked short-term "buy" signals.


160802DJIA_COMP1

160802DJIA_COMP2


To see how the DJIA tends to fare after lengthy losing streaks, click here. To see what could be in store for the S&P 500 Index (SPX) in August, click here.


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