Since we recently gathered the data to analyze historical winning and losing streaks of all stocks in the S&P 500, we figured we would combine the individual numbers to make a composite of them all. We first took the number of days each stock in the S&P has been up or down on a daily basis over the past year and added them up to get a total up/down streak spread for each day. (As an example, if it were a two stock index and one stock has been up five days in a row and the other has been down three days in a row, the spread for that day would be two.) We then took the ten-day average of the daily up/down streak spread and plotted it over the past year along with the S&P 500.
From the chart below, it seems that +/-300 readings are the rarest occurrences, so we looked at how the Index has performed over the week following an initial reading that breaks those levels. Over the past year, the spread has broken below -300 three times, and the average one-week return for the S&P following the break has been 1.69%. The spread has broken above +300 six times, and the average one-week return following these occurrences has been -0.11%. We realize the data only goes back one year, but it has been a pretty good contrarian indicator over this time frame.
Interestingly, even though the market has recently been gaining day after day, the current ten-day up/down streak spread is 71.5.
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