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Why the Nasdaq's Weekly Win Streak May Not Be Over

The COMP's weekly winning streak is the longest we've seen in four years

Aug 15, 2016 at 12:44 PM
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The Nasdaq Composite (COMP) has been stringing together record closing highs of late, and is fresh off its longest weekly winning streak since March 2012. Specifically, the tech-heavy COMP has advanced for seven consecutive weeks, its longest such streak in over four years. In the chart below, courtesy of Schaeffer's Senior Quantitative Analyst Rocky White, are all the winning streaks of at least seven weeks that we've seen since 1990:

nasdaq win streaks summary august 15A

Two quick observations on the data above. First, the current streak isn't close to the longest ever -- which took place in late 1999, spanning 11 weeks. Second, the last time the COMP finished seven consecutive weeks higher (March 2012), the index really struggled, dropping 2.6% in the next two weeks. Going out to three months, the Nasdaq was down more than 5%.

But are those post-streak struggles typical? Rather than trying to ballpark a conclusion based on the table above, here are two more charts. The one on the left summarizes the data above, while the one on the right displays the COMP's anytime returns since 1990.

nasdaq win streaks summary august 15

It's pretty clear that the March 2012 returns are not representative of the whole. In general, the COMP tends to fare very well in the aftermath of long winning streaks. Based on the above, the average return one week out is 0.7%, versus an anytime gain of just 0.2% (though, admittedly, the percent positive is lower -- 50% vs. 55.5%).

Going out to three months, the outperformance is even clearer. The Nasdaq sports a typical gain of 6.7%, with 75% positive -- easily besting the respective anytime figures of 3.1% and 65.5%.

What do win streaks mean for individual stocks? Below, White put together two charts containing the best- and worst-performing optionable stocks after COMP win streaks, based on four-week returns. All the stocks trade at least one million shares per day or weekly options.

stocks after nasdaq win streaks august 15

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