Dow Win-Streak Data Suggests a Sour Start to 2017

Historical data suggests the Dow's weekly win streak will make it to eight -- but after that, things get more dicey

Dec 23, 2016 at 2:10 PM
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As we mentioned earlier, the Dow is on the verge of its seventh consecutive weekly win -- its longest hot streak since late 2014. This would be just the 12th time the blue-chip index has reached such a milestone in the past 50 years. Below are two charts, courtesy of Schaeffer's Senior Quantitative Analyst Rocky White, which compare the Dow's returns after these winnings streaks to their anytime returns. The second chart looks back to 1985, since this was the first time the benchmark reached a seven-week streak after 1967.

dow weekly win streak dec 23

As you can see, the post-streak returns are bullish in the short term, but disappointing further out. One week after the winning streak hits seven, the Dow has been positive nine out of 12 times (75%), with an average gain of 0.5% -- besting the anytime averages of 58.2% and 0.2%, respectively. However, by two weeks, there's very little difference between the two charts, and by one and three months, the Dow actually underperforms relative to its anytime returns and percent positive. In other words, the index could close out 2016 on a high note, but sour in early 2017.

Below is a list of the 12 occurrences summarized above. One thing that jumps out is how bearishly things turned after the Dow's prior seven-week streak in late 2014. The very next week, the index lost 3.8%, and after three months, its return was still negative.

dow weekly win streak list dec 23

However, if we look further back, the story changes quite dramatically. White surveyed the data since 1900, and found 45 seven-week winning streaks for the Dow. When all of these occurrences are taken into account, the post-streak returns are actually extremely promising:

dow weekly win streak since 1900 dec 23

The charts above show that the Dow's average return and percent positive are much better after seven-week winning streaks than they are anytime. One week out, the index averages a post-streak return of 0.6%, with 73.3% positive; the anytime data is less remarkable, with a typical return of only 0.1% and 56.1% positive. This trend bears out across the board.

Finally, White also put together a list of the 10 longest weekly winning streaks on the Dow. Notably, all of these occurred prior to 1967, which is one reason why the longer-term data (since 1900) is so much more bullish than the 50-year data (since 1967).

dow longest weekly win streaks dec 23

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