Market's Back-to-Back Streak
Wednesday, November 28, 2007 | 01:00 PM
Well, the Christmas Rally we discussed on Monday and Tuesday has finally arrived.
Indeed, like the NY Knicks, the Markets have finally pieced together two consecutive winning days.
Since the decline that began on October 30th, the S&P 500 has gone 19 days without having more than one winning session in a row.
I have been following this ever since my friend Paul first asked about what the failure to have two consecutive back-to-back winning days actually means. I was speaking with Mike Panzner about this earlier in the week. Mike noted:
• The longest such streak (since 1999) was the 24-day run that ended on 9/21/01. The second longest streak was 22 days, which ended on 3/21/01. There have been two other streaks of 21 days each, ending on 10/3/00 and 4/29/02, respectively.
• Except for the post 9/11 streak, which marked a climactic V-bottom low in the equity market, other spans seemed to define the first leg of a downdraft that "paused" for anywhere between 4 and 14 days before it resumed.
• Visually speaking, the pattern that developed when those prior one-day-wonder streaks ended was a "flag," which in technical analysis terms, often implies that a move -- in this case, the downtrend -- is about half-way over.
• For what it's worth, the same also holds true for the two shorter streaks of 16 days that ended on 1/28/03 and 4/1/05, respectively.
• Based on past history, then, it seems that once the current streak ends ( i.e., we see two or more winning sessions in a row), the risk is that it won't be long before the market begins another push lower.
I would add one item to Mike's comments: The wild swings in the markets, +/- 2%, with violent up 200 or 300 point days don't typically come in healthy Bull markets -- these spasms are symbolic of Bear markets.
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