Dow Is Doing This for Just the Second Time Since 1964

The Dow Jones Industrial Average is about to wrap up its longest quarterly win streak since 1996

Jun 29, 2017 at 3:36 PM
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While the Dow Jones Industrial Average (DJIA) is getting hammered today, last seen with a triple-digit deficit, the blue-chip index is still set for a second-quarter gain of 3%. What's more, the index is about to do something it hasn't in more than 20 years: notch a seven-quarter winning streak. Below, we'll discuss the rarity of these lengthy rallies, as well as what the current streak could mean for blue-chip stocks over the next year.

Currently, the Dow is pacing for a seven-quarter gain of about 30.71%, which will mark the smallest of all similar win streaks. The last time the DJIA rallied for seven quarters or more was in the mid-1990s, with its record streak of 11 positive quarters finally coming to a halt in September 1996. Prior to that, you'd have to go back another 32 years for a signal, to 1964, according to data from Schaeffer's Senior Quantitative Analyst Rocky White.

dow seven-quarter win streaks

After seven-quarter win streaks -- which have happened just seven other times ever -- the Dow Jones Industrial Average has gone on to average a loss of 1.95% over the next quarter. However, it should be noted that the last time one of these streaks ended at seven quarters was in March 1951, 66 years ago. If you look at the next-quarter returns after the last three signals, the Dow has averaged a gain of 5.08%. That's compared to an anytime average quarterly gain of 1.92% for the Dow, since 1923.

At the six-month marker, the Dow has been higher 0.39%, on average, following a seven-quarter winning streak, compared to an average six-month gain of 3.88%, going back to 1923. However, the last time the DJIA was in the red six months after a seven-quarter winning streak was 71 years ago, in June 1946. Excluding the first three signals, the Dow has averaged a six-month gain of 9.21% after the last four streaks -- more than double its anytime average return.

It's the same story one year after a signal. Following seven-quarter winning streaks, the Dow has averaged a gain of 0.84%. Again, though, the last time the blue-chip barometer was lower a year after a signal was in 1946. Excluding the first three signals, the Dow has averaged a gain of 15.5% over the subsequent year, and rallied another 35.07% after the last signal, in 1996. For comparison, the DJIA has averaged an anytime one-year gain of 8.05% since 1923.

dow after seven-quarter streaks

In conclusion, if the last few of these rare quarterly streaks are any indicator, the days of record highs aren't behind the Dow Jones Industrial Average. Further, that echoes the recent signal set off by the Nasdaq-100 Index (NDX). However, speculators who want to play for higher highs but don't want to risk a lot of capital should consider buying call options instead of stocks.



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