Putting The Dow 10-Day Win Streak In Perspective

The Dow Jones Industrial Average finished slightly red yesterday (August 8, 2017), ending a streak of 10 consecutive closes higher. This was the second 10-day win streak of the year, with a 12-day win streak ending in late February. We wrote about what happens after 10-day win streaks here and looking back (correctly) concluded that long winning streaks have rarely been bearish signals.

The recent 10-day win streak, the second this year, marks the first year since 1959 to have two separate 10-day win streaks; that’s nearly 60 years! It doesn’t stop there though. Per Ryan Detrick, Senior Market Strategist, “The Dow’s 10-day win streak gets all the headlines, but looking under the hood reveals this was the worst return during a 10-day win streak ever at 2.8%. Also, the S&P 500 Index was up only six days out of the 10 with a small 0.4% gain during the period. Both indexes’ performances were the worst ever amid a 10-day win streak for the Dow. In other words, the streak is impressive, but it isn’t like this rally is blasting off into space–it is historically reserved actually.”

What does it all mean? First off, it is actually encouraging that markets aren’t soaring to new highs. Slow and steady tends to win the race when it comes to investing. Additionally, we won’t get too tied up into schematics here; but the bottom line is this bull market is strong and new highs tend to beget new highs. The recent divergence between the two indexes could be a simple function of the differences in how the indexes are constructed-the Dow being price-weighted while the S&P 500 is market cap weighted. Thus, some of the smallest components of the Dow by market cap have the highest weights due to the price-weighting nature of the index, and those have had a good run during the past two weeks–thus skewing things.



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Investing in stock includes numerous specific risks including: the fluctuation of dividend, loss of principal and potential illiquidity of the investment in a falling market.

Dow Jones Industrial Average (DIJA) is the most widely used indicator of the overall condition of the stock market, a price-weighted average of 30 actively traded blue-chip stocks, primarily industrials. The 30 stocks are chosen by the editors of the Wall Street Journal. The Dow is computed using a price-weighted indexing system, rather than the more common market cap-weighted indexing system.

The S&P 500 Index is a capitalization-weighted index of 500 stocks designed to measure performance of the broad domestic economy through changes in the aggregate market value of 500 stocks representing all major industries.

The modern design of the S&P 500 stock index was first launched in 1957. Performance back to 1950 incorporates the performance of predecessor index, the S&P 90.

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