The 10-month win streak in the Dow that ended last month was the longest since 1959 but at the lowest return in the last 104 years. Some key statistics are included.
Below is a monthly chart of Dow Jones Industrial Average since 1914.
The first indicator pane shows the Win Streak Indicator for 10 periods (months.) This indicator has a value of 100 if in N periods there is a win streak and falls to 0 if there is a streak of losses. It may be seen that the WSI(10) on the monthly chart reached 100 in five different time periods, some of which involved win streaks of a duration of more than 10 months.
The bottom indicator shows the rolling arithmetic return for 10 months. Statistics such as the mean and standard deviation are also shown. The red dotted line shows the return of the recent 10-month win streak at 26.6%. This has been the lowest such return shown on the chart although it is only 0.5% lower than the return of the 10-month win streak realized on May 1950. The 1959 streak return was 32%.
Monthly win streaks show a tendency of a return to markets to maintain their momentum during strong uptrends. This may be seen from the 1-lag, 120-month autocorrelation chart of returns of the Dow below.
This is an interesting chart. It may be seen that near the dot com top monthly returns became mean-reverting and this lasted until quantitative easing forced a return to momentum. The 1-lag, 120-month autocorrelation is still high at 0.104 and the market is trying to maintain as close to the upper significance band at 0.18 as possible. In this content this is still a bull market, something that is obvious by the way. But is the autocorrelation falls below 0, then that may be a sign of a coming long period of market uncertainty. For now this indicator does not point to this scenario but regime switches can be fast as experience has shown.
If you have any questions or comments, happy to connect on Twitter: @mikeharrisNY
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