What This Rare Dow Feat Means for Blue-Chip Stocks

More than a third of the last 11 Dow signals occurred since July 2016

Aug 3, 2017 at 1:41 PM
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The Dow Jones Industrial Average (DJIA) not only topped the round-number 22,000 level yesterday -- marking the fourth millennium-level takeout in less than a year -- the index today notched its seventh straight record high. Since 1955, there have been just 10 other stretches of this magnitude. Below, we'll take a look at previous Dow streaks of consecutive all-time highs, and analyze what it might mean for blue-chip stocks in the second half of the year.

Since July 2016, this is the fourth time the Dow has gone on a seven-session streak of record peaks -- what we'll call a "signal" -- according to data from Schaeffer's Senior Quantitative Analyst Rocky White. For context, you'd have to go back to 2013 for the last signal, and to 1996 -- the only other calendar year with more than one signal -- before that. In other words, 36.3% of the past 11 signals have come within the last 13 months.

Dow after 7 straight record highs



Historically, Dow strength begets strength. The average returns for the blue-chip index have been stronger than usual across the board, looking out six months after a signal. One week after, the DJIA averaged a gain of 0.57% -- four times its average anytime one-week gain of 0.14%, since 1955. One month after a signal, the Dow was up 1.46%, on average, more than twice its anytime one-month return of 0.62%.

Three months after a signal, the Dow was up an average of 4.28%, with a win rate of 80%. That's more than twice the index's average anytime three-month gain of 1.87%, with a win rate of 63.7%. The percent positive is even higher at the six-month marker, at 88.9%, with the Dow lower just one out of nine times -- back in 1965. Plus, the DJIA was up an average of 7.71% six months after a signal, compared to 3.78% anytime.

It's also worth noting that the blue-chip barometer tends to be less volatile than usual after a string of seven consecutive record highs. This is according to Standard Deviation in the chart below, which is smaller than usual across the board. As such, if past is prologue, the Dow Jones Industrial Average could be headed for a low-volatility grind higher into 2018.

dow returns after 7-day streaks of record highs


 

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