Why 2015 is a Bad Omen For the Dow's Weekly Win Streak

The Dow is on the brink of a sixth consecutive weekly winning streak

Dec 14, 2016 at 11:57 AM
facebook twitter linkedin

The Dow has been making a strong push toward the 20,000 level, resulting in dangerously high levels of optimism. Specifically, the blue-chip index has soared roughly 11% relative to its most recent bottom on Friday, Nov. 4. In fact, the Dow is currently on track for its sixth consecutive weekly advance -- a milestone that's been achieved just 22 times over the past 50 years.

Below, Schaeffer's Senior Quantitative Analyst Rocky White breaks down the implications of six-week win streaks on the Dow. The first chart provides the post-streak returns over different time frames, while the second offers the anytime data. White looked back to 1972 -- the year in which the benchmark first achieved the six-week streak.

dow win streaks 1 dec 14

As you can see, the post-signal returns are a mixed bag, especially short term. The three-month data, however, suggests the Dow's performance does tend to slow relative to its anytime returns. While the index has gained 1.2%, on average, after its six-week win streaks -- and been positive 54.5% of the time -- both figures are well below their anytime counterparts of 2% and 63.8%, respectively.

However, one trend that holds across all time periods is decreased volatility after the signal, as measured by standard deviation. In other words, it seems that the Dow, after a rapid run higher, tends to calm down considerably afterward -- as the stock market consolidates its gains.

Below, White breaks down the 22 previous six-week signals even further. Bulls should be praying against a repeat of the most recent occurrence. Last November, following a six-week win streak, the Dow fell off precipitously, losing 9.5% in the ensuing three months.

dow win streaks 2 dec 14

Let us help you profit from market volatility. Target big gains in short order with a 30-day trial of Schaeffer's Weekly Volatility Trader!


Minimize Risk While Maximizing Profits

There is no options strategy like this one, which consistently minimizes risk while maintaining maximum profits. Perfect for traders looking for ways to control risk, reduce losses, and increase the likelihood of success when trading calls and puts. The Schaeffer’s team has over 41 years of options trading success targeting +100% gains on every trade. Rest assured your losses are effectively limited to your initial cost at the time of making your move! Don't waste another second... join us right now before the next trade is released! 


300x250 - Banner 3 - v1