Stocks Haven't Done This Since Trump Was Elected

The major stock market indexes simultaneously fell for five straight days

Mar 11, 2019 at 10:33 AM
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The Dow Jones Industrial Average (DJI), S&P 500 Index (SPX), and Nasdaq Composite (IXIC) last week dropped every single session, marking the first time the indexes suffered a simultaneous five-day losing streak since November 2016, just before the presidential election. Below, we take a look at how the stock market barometers have fared after sinking in unison -- which also happened right around the March 2009 bottom -- and what Wall Street might expect in the next few months.

Since 1972, there have been just 56 times when the trio of indexes dropped five straight days simultaneously, according to Schaeffer's Senior Quantitative Analyst Rocky White. The longest simultaneous losing streak was in August 1982, at eight days.

Although stocks are down again this morning, it's encouraging that the indexes tend to outperform after these signals. One week later, the DJI was up 1.06%, on average, and higher two-thirds of the time. That's handily better than its average anytime one-week return of 0.17% (looking at data since 1972), with a win rate of 56%. That outperformance continues one month later, with the blue-chip index up an impressive 2.2%, on average -- roughly three times the norm -- with a healthy win rate of 66%.

Dow after indexes 5day streak

Likewise, the S&P averaged a gain of 1.2% one week after signals -- about 10 times its average anytime one-week return of 0.17% -- and was higher 66% of the time. A month later, the SPX was up 2.31%, on average, with a win rate of 70%. That's compared to an average anytime one-month gain of just 0.69%, with 61% positive.

spx after indexes 5day streak

The Nasdaq, too, tends to bounce back strong -- though not quite as strong as the Dow and S&P 500. The tech-rich index was up 0.79%, on average, a week after signals, with a 59% win rate, compared to an average anytime one-week gain of 0.22%. A month out, the Nasdaq was 1.54% higher, on average, compared to 0.93% anytime. However, three months later, the Nasdaq was up just 1.73%, on average -- underperforming its average anytime three-month gain of 2.84%.

nasdaq after indexes 5day streak

Aside from relatively lackluster Nasdaq returns three months after signals, another thing worth noting is the Standard Deviation across the board. Specifically, Standard Deviation runs hotter than usual after signals, as you can see from the images above, suggesting that higher volatility could be on the horizon for Wall Street in the short term. This could especially be true if the Cboe Volatility Index (VIX) rallies above 18, as noted by Schaeffer's Senior V.P. of Research Todd Salamone in this week's Monday Morning Outlook.


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