Study: what happens next when the Dow goes up 8 days in a row


The Dow Jones Industrial Average has gone up 8 days in a row (using CLOSE $). What’s unusual is that this is happening before the Dow has hit a new all-time high. These “up 8 consecutive days” events usually happen when the stock market is making new highs.
Here are the historical cases in which the Dow closed higher 8 days in a row, and what happened next to the stock market (Dow and S&P 500).
*This is a rather common event, so we’re only looking at the historical cases in this current bull market, which began in March 2009.

  1. May 14, 2018 (current case)
  2. August 3, 2017 (ended up being 10 consecutive days)
  3. February 21, 2017 (ended up being 12 consecutive days)
  4. July 19, 2016 (ended up being 9 consecutive days)
  5. March 12, 2013 (ended up being 10 consecutive days)
  6. February 9, 2011
  7. March 18, 2010
  8. August 27, 2009

*This is a SHORT TERM market study. The Dow going up 8 days in a row tells us nothing about what the stock market does during the medium-long term. It only tells us what the stock market will do next in the short term.

August 3, 2017 (ended up being 10 consecutive days)

The Dow ended up rallying 10 days in a row. It then made a pullback that lasted approximately 1 month. The S&P 500 did likewise.

February 21, 2017 (ended up being 12 consecutive days)

The Dow ended up rallying 12 days in a row. It then made a pullback that lasted approximately 1.5 months. The S&P 500 did likewise.

July 19, 2016 (ended up being 9 consecutive days)

Once this “8 days up” streak was broken, the Dow made a big pullback that lasted 3 months (this came close to being a “small correction”). The S&P 500 did likewise.

March 12, 2013 (ended up being 10 consecutive days)

The Dow ended up closing higher 10 days in a row. Then it consolidated sideways over the next month before trending higher. The uptrend was choppy. The S&P 500 did likewise.

February 9, 2011

The Dow and S&P soon began 6%+ “small corrections”.

March 18, 2010

The Dow and S&P rallied for 1 more month before starting “significant corrections”. The Medium-Long Term Model predicted these “significant corrections”.

August 27, 2009

The Dow and S&P immediately made a pullback.

Conclusion

With the Dow closing higher 8 days a row, now is not the best time to buy stocks if you missed the February/April 2018 bottom. There’s a high probability that the stock market will at least make a small pullback. The short term risk:reward is skewed towards the downside.
Read Stocks on May 15, 2018: outlook
On a completely unrelated sidenote, I’ve listened to this song 20 times today already.

5 comments add yours

  1. Thanks for the short term market study. Other technical analyst I follow are giving high probability to a short term pull back before finally breaking out of this correction. Maybe retesting 200 MDA, but it seems the bottom is in for now (as your study on breadth suggest). Blessings!

  2. My technical analysis shows that the song is in all-time HIGHS, WITH RSI PERMANENTLY OVERBOUGHT!!
    Thanks for everything you are doing for us. Every time i study your articles i learn something valuable …

  3. This time I kind of disagree: yes a short term pull back is possible, but overall the bullish bias is also the possible winner.
    We look every day at the market momentum, and we can fall in the trap: as Troy has stated in hundreds articles, “short term is quite unpredictable and random, better focus on the long term”.
    So I am staying on this plan, and I will not care about possible pullbacks, IF they will really occur.
    Thanks Troy, with your articles I’ve found my confidence, the one which is necessary to trade smart, and which I did not have before.

    • Yes, I agree with you. Focus on the medium-long term. The short term is hard to predict. This is just for the short term traders 🙂

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