Did the Santa Claus Rally Come Early This Year?

A nine-week win streak would be the S&P's longest in 13 years

Nov 6, 2017 at 2:03 PM
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The Dow Jones Industrial Average (DJIA) and S&P 500 Index (SPX) on Friday notched an eighth straight weekly gain, marking their longest weekly win streaks in nearly four years. Another win this week would mark the Dow's longest since 1995, and would tie the SPX's longest streak in 13 years. Below, we take a look at how the DJIA and S&P tend to fare after eight straight weeks in the black -- and which index's "Santa Claus rally" may have come early this year, if history is any guide.

Dow's Best 8-Week Rally since 2010

The Dow's last eight-week winning streak was in November 2013, in which the index gained 6.73%. During its most recent streak, the DJIA gained 8.03% -- the healthiest rally of its kind in seven years, according to data from Schaeffer's Senior Quantitative Analyst Rocky White.

dow last 8-week win streaks

Weekly Win Streaks Typically Stop at 8

The index tends to take a breather after these lengthy rallies, staying flat over the next week, and positive just 45.5% of the time at Week 9. Two weeks and one month after these streaks, the DJIA was in the red, compared to average anytime two-week and one-month gains, looking at data since 1904. Three months after an eight-week win streak, the blue-chip barometer was up 0.74%, on average -- not even half its average anytime three-month gain of 1.80%. So, if history is any guide, the Dow's "Santa Claus rally" may have come early this year.

dow after 8-week win streaks

S&P's Smallest 8-Week Rally Since 1993

It was also the S&P 500's longest weekly win streak since November 2013. However, the index jumped just 5.09% during its most recent run -- the smallest return during an eight-week win streak since 1993, when the SPX added just 3.58%.

spx 8-week win streaks

SPX Tends to Outperform 1 and 3 Months Later

Like the Dow, the SPX tends to underperform in the short term, following eight-week win streaks. At the one- and two-week marker, the index was in the red, on average, and was positive not even half the time two weeks later. That's compared to an average anytime gain for the S&P 500, going back to 1932.

However, unlike the Dow, the SPX tends to outperform one and three months later. Specifically, the index was up an average of 0.92% a month after a win streak, and was higher 69.6% of the time, exceeding its average anytime returns. What's more, the Fed's recent decision to maintain the status quo on interest rates tends to bode well for the SPX over the next month. Meanwhile, three months after a streak, the S&P was up 2.83%, with a win rate of 73.9% -- much better than usual.

spx after 8-week win streaks

A Ninth Straight Win In Store?

At last check, the Dow and S&P were modestly higher -- and fresh off all-time highs -- as traders eye an oil rally and the latest M&A news. A ninth straight weekly win on Friday would be the Dow's longest since May 1995, when the index gained for 10 weeks straight and rallied 11.05%. The DJIA's longest ever weekly win streak was in 1965, where the blue-chip barometer ended higher for 14 straight weeks, gaining 11.21%.

dow longest weekly win streaks

As alluded to earlier, a ninth straight weekly win on Friday would tie the S&P's longest stretch since January 2004, in which the SPX gained 10.27%. The S&P's longest weekly rally ever happened in mid-1957, when the index surged for 13 weeks straight, but gained just 9.31%.

spx longest weekly win streaks



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