The index just wrapped up its longest downturn since early 2017
The Dow Jones Industrial Average (DJI) on Tuesday extended its losing streak to a sixth session, marking the longest since March 2017. Prior to that, you'd have to go back to November 2016, to just before the U.S. presidential election, for a similar streak. Further, the index surrendered 2.46% during this recent stretch, for its worst six-day losing streak since the August 2015 sell-off. While the DJI is set to snap its streak today, as traders eye Walt Disney (DIS) and soon-to-be-ex-Dow stock General Electric (GE), below we take a look at what to expect for the Dow after these stretches, and which blue-chip stocks to buy now, if history is any indicator.
Since 1990, there have been 29 other six-day losing streaks for the Dow. The data below -- courtesy of Schaeffer's Senior Quantitative Analyst Rocky White -- suggests the index could outperform in the near term, if past is prologue. The DJI was higher 72.4% of the time on Day 7 (which would be today), and averaged a return of 0.31%. That's far better than its average anytime one-day gain of 0.02% with a 53.2% win rate, looking at data since 1990.
Two weeks after a six-day spiral lower, the Dow was up 0.84%, on average -- more than twice its average anytime return of 0.34%. It's the same story one month later, with the DJI averaging a post-streak gain of 2.23%, with a win rate of 72.4%. That's roughly triple the index's average anytime gain of 0.74%, with a positive rate of 62.8%.
Below is how Dow components performed a month after six-day losing streaks, looking at data since 2010. All of the stocks have 13 returns, and DowDuPont (DWDP) was excluded with just one return.
Retail giant Walmart Inc (NYSE:WMT) stands alone at the top -- the only stock that was higher 85% of the time a month after a Dow losing streak. WMT averaged a healthy one-month gain of 3.28%. Fellow retail issue Nike Inc (NYSE:NKE) racked up an even higher average return of 4.36%, with a 77% win rate. The highest average return of all blue chips went to Visa Inc (NYSE:V), with a gain of more than 5%, and higher 69% of the time. The lowest post-streak gain went to IBM Corp (NYSE:IBM), which was essentially flat a month after a Dow losing streak.