by Danny Riley

Winning Streaks Are Made To Be Broken

Rally Streak continues for SPX, NDX

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Our View

I always think that winning streaks are made to be broken.

My friend Jeff Hirsch from the Stock Trader’s Almanac did a guest post in April 2014 about winning streaks, titled History Of SPY Daily Winning Streaks.

Here’s an updated look at Jeff’s thoughts: Still Bullish – Even After S&P 500 Daily Winning Streak Ends.

He wrote:

Including the current S&P 500 daily winning streak there have been 233 six-day (or longer) Winning streaks by S&P 500 since 1950. The current 8-day streak has added 6.4% to the S&P 500 since it began on October 30. This is better than the average performance of the past 34 times that S&P 500 has been up eight days in-a-row, but well below the 11.9% S&P climbed in an eight-trading-day streak from March 12 to March 21, 2003.

History cannot tell us when this current streak will end. However, it does indicate increasingly longer streaks are infrequent. Although S&P 500 has gone as long as 14 days without a decline (March 26 to April 15, 1971), it has done so just once in nearly 74 years. When the streak does end, all is not lost. As you can see in the following chart of the 30 trading days before and 60 trading days after the past 7-, 8-, and 9-day daily winning streaks ended, S&P 500 continued to move higher on average over the next 60 trading days.

Jeff Hirsch, Stock Trader’s Almanac

Our Lean

As I said yesterday, winning streaks are made to be broken. But in this case, we are not seeing much of that so far. What we are seeing is a low-volume pause. Will it lead to further selling today?

I think so and it fits perfectly into the PitBull’s Thursday/Friday low trading rule the week before monthly expiration.

The 50% retracement from the 4407 high to the 4120 low is 287 points — half of that is 143.5 points or 4263.50 which seems like a mile away. Additionally, the bonds that made a low at 107.50 rallied six straight days from 108.19 to 115.12 and are up exactly 8 points off the low. It’s hard to deny the ferocity of the rallies.

Our Lean: I’m looking to sell the early rallies and buy the 30-point pullbacks.

For those of you who like HandelStats levels, here they are:

Upside: Trade and hourly close above 4406 targets 1 sd at 4424.21. Hourly close above there targets 4427, then 4431.16, then 4435.50. Hourly close above there targets 4443.43, then 2 sd at 4452.67.
- (4452.67 is a highly probable target with an hourly close above 4435.50).
Downside: Trade and hourly close 4406 targets 4401.25, then 4396.50. Hourly close below there targets 4:15 settlement at 4395.75, then 4392.75. Hourly close below there targets 4388.51, then 4383.38. Hourly close below there targets 4374, then -1 sd at 4367.29. Hourly close below there targets 4355.25, hourly close below there targets – 2 sd at 4338.83.

MiM and Daily Recap

ES recap 15-min

The ES traded up to 4404.00 on Globex and traded 4402.25 on Wednesday’s regular session open. After the open, the ES rallied up 4407.75 at 9:57, slowly dripped down to the 4388.00 level at 11:25, back-and-filled for the next 20 minutes, traded up to 4395.50 at 11:48 and then sold off down to new lows at 4375.00 at 12:09.

After the low, the ES rallied up to 4398.25 at 2:33 and chopped in a 4 to 6 point range until the ES popped up to 4404.75 as the early imbalance showed $545 million to buy. The ES traded 4401.50 as the 3:50 cash imbalance showed $1.635 billion to buy and traded 4398.50 on the 4:00 cash close. After 4:00, the ES pulled back to the 4394.25 level and settled at 4393.50 on the 5:00 futures close, down 4 points or 0.09% on the day.

In the end, it was a very choppy, low-volume day. In terms of the ES’s overall tone, it was firm. In terms of the ES’s overall trade, volume was low: only 181k traded on Globex and 1.137 million on the day session for a total of 1.318 million contracts traded.

Technical Edge

NYSE Breadth: 33% Upside Volume
Nasdaq Breadth: 37% Upside Volume
Advance/Decline: 42% Advance
- Last week: Back-to-back 80/80 days for A/D and NYSE Breadth
VIX: ~14.50

ES

Levels from HandelStats.com

ES Daily

Upside: Trade and hourly close above 4406 targets 1 sd at 4424.21. Hourly close above there targets 4427, then 4431.16, then 4435.50. Hourly close above there targets 4443.43, then 2 sd at 4452.67.
- (4452.67 is a highly probable target with an hourly close above 4435.50).
Downside: Trade and hourly close 4406 targets 4401.25, then 4396.50. Hourly close below there targets 4:15 settlement at 4395.75, then 4392.75. Hourly close below there targets 4388.51, then 4383.38. Hourly close below there targets 4374, then -1 sd at 4367.29. Hourly close below there targets 4355.25, hourly close below there targets – 2 sd at 4338.83.

NQ

NQ Daily

Upside: Hourly close above 15384.50 targets 15435.50. Hourly close above there targets 15477.77, then 1 sd at 15508.30. Hourly close above there targets 15546.62, hourly close above there targets 2 sd at 15644.60.
Downside: Hourly close below 15384.50 targets 15372. Hourly close below there targets 15358.50, hourly close below there targets yesterday’s low 15286.75 and my level 15287.27. Hourly close below 15282.00 targets – 1 sd at 15235.70, then 15223. Hourly close below there targets 15179.25, hourly close below there targets -2 sd at 15099.40.