Losing Streaks

The S&P 500 is currently riding a 5-day losing streak.  Since the bull market began, the index has had 8 other 5-day losing streaks.  On day 6 following these 8 prior 5-day losing streaks, the index has been down 5 out of 8 times for an average return of –0.08% (median –0.42%).  In the week following 5-day losing streaks for the S&P 500 since March 2009, the index has done much better.   As shown in the right table below, the S&P has averaged a gain of 1.59% (median 2.35%) in the week following 5-day losing streaks with gains 7 out of 8 times.  The average S&P 500 change over all one week periods has historically been 0.15%, so 1.59% is much better than normal.   One-week performance numbers if you look at all 5-day losing streaks going back to 1990 are similarly positive with an average return of 1.34%.

The S&P 500 Financial sector is on an even greater losing streak at 8 consecutive down days.    Going back to 1990, the Financial sector has only had 7 other 8-day losing streaks, and the sector has done very well in the near term when it has been down 8 days in a row.  As shown in the left table below, the Financials have gained an average of 1.20% (median 0.96%) on day 9 following an 8-day losing streak, and they have gained an average of 3.16% (median 2.45%) over the next week.  The bulls will be hoping history remains on their side in the coming days.