This Year Could Be One for the Dow Record Books

The Dow is looking for a ninth straight win

Aug 4, 2017 at 2:22 PM
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Unless you've been hiding under a rock, you probably know the Dow Jones Industrial Average (DJIA) has been seemingly unstoppable the last two weeks, with help from serious earnings wins from blue-chip stocks Boeing and Apple. The index hit a record high today for an eighth straight session -- a rare stock market signal in itself -- and is pacing for a ninth straight daily win. Below, we'll take a look at how the DJIA tends to perform after these lengthy winning streaks, what the Dow's recent run atop its upper Bollinger Band could mean for blue-chip stocks, and why 2017 is on pace to be one for the record books.

The Dow Hasn't Notched 2 Lengthy Win Streaks in a Year Since 1996

Whether or not the DJIA notches a ninth straight win today, it's already shored up its longest winning streak since February's 12-session rally. In fact, it's just the second winning streak of this magnitude for the Dow since July 2016, and marks the first time the DJIA has enjoyed two winning streaks of eight days in a calendar year in at least 20 years. A pair of nine-day winning streaks in 2017 would mark the first feat of its kind since 1996. Below are the last 10 winning streaks of eight and nine days, respectively, for the index, courtesy of Schaeffer's Senior Quantitative Analyst Rocky White.

Dow after 8-day win streaks

Dow after 9-day win streaks

The Dow's longest-ever winning streak amounted to 13 days, and ended in early 1987. There have been three 12-day winning streaks for the blue-chip barometer, the last of which happened earlier this year, during the late February jump.

dow longest win streaks

DJIA Performance After 8- and 9-Day Win Streaks

Below is how the Dow tends to perform after eight- and nine-day rallies. One day after an eight-day win streak, the DJIA has averaged a loss of 0.08%, according to White. However, the Dow Jones Industrial Average is currently higher today. The day after nine-day win streaks, the Dow has averaged a gain of 0.18%. That's compared to an anytime one-day average gain of 0.03%, looking at data since 1950.

The Dow tends to fare better a week after nine-day winning streaks, compared to eight, averaging gains of 0.54% and 0.27%, respectively. However, the index's average one-month return after an eight-day winning streak is 1.26% -- more than double the average one-month return of 0.57% after a nine-day rally.

Nevertheless, regardless of the length of the rally, the Dow tends to outperform significantly three months later. Specifically, three months after an eight-day winning streak, the DJIA was up 3.3%, on average, and higher 80.9% of the time. Three months after a nine-day rally, the Dow was up 3.06%, on average, with a 75% win rate. No matter how you slice it, that's far better than the DJIA's average anytime three-month return of 2% and win rate of 64.2%.

Dow returns after 8day win streak

Dow returns after 9day win streak

Dow Topped Upper Bollinger Band for 5 Straight Days

Amid its monster surge, the Dow Jones Industrial Average recently logged five straight closes above its upper Bollinger Band (BB) -- typically seen as an "overbought" signal. The DJIA also did this during the aforementioned February rally, as well as back in mid-December. Going back to at least 1987, this will be the first time the index has gone three stretches of this length above its upper BB in a 12-month span.

dow chart since february

dow after 5 days above top bb

Following these strings of consecutive closes above its upper BB, the Dow has tended to outperform in the next month. One week after what we'll call a "signal" -- which would be next Wednesday, for the current run -- the DJIA has averaged a gain of 0.74%, more than four times its anytime one-week average gain of 0.16%, since 1950. Plus, the index was in the black 88.5% of the time one week after a signal.

The Dow's average two-week return after a signal is 0.8% -- more than twice its average anytime return in this time frame. Similarly, the index sports a win rate of 73.1% at the two-week marker, compared to 57.8% anytime. It's the same story a month after a signal, with the DJIA up an average of 1.24% -- nearly twice its anytime one-month return.

However, things start to even out three months after a Bollinger Band signal. The Dow was up an average of 1.84% at the three-month marker, with a win rate of 65.4%. That's roughly in line with the index's average three-month gain of 2% and win rate of 64.2%.

dow returns after bb signal

Does Dow Strength Beget Strength?

In conclusion, 2017 is on pace to be one for the record books for the Dow. Not only is the DJIA set to enjoy a second lengthy win streak -- a feat not accomplished in more than 20 years -- but the index's rare Bollinger Band signal just sounded for the third time in nine months. And if recent history is any indicator, Dow strength could beget strength -- in the short term at least.


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