#$dji

Today DJIA extended its consecutive daily winning streak to 10 trading days. Nine of these days were also new all-time highs. Neither is a record-setting feat, but DJIA is getting closer. Its longest winning streak on record going back to 1901 was 13 trading day in January 1987. Its longest streak of consecutive new all-time highs was also in January 1987 at 12. DJIA matched that previous all-time high winning streak earlier this year in February.

Ten trading day or longer daily winning streaks are rare. DJIA has had only 21 of them prior to the current streak since 1901. Of those 21 winning streaks, four were also new all-time high streaks that latest 10 or more trading days (August 1927, July 1929, January 1987 and February 2017). In the following chart, the 30 trading days before and 60 after the daily winning streak of 10 or more trading days came to end. Generally, DJIA remained bullish over the next 60 trading days (approximately three calendar months), only the pace of gains slowed.

Looking further ahead, DJIA’s performance six months and one year later are in the following table. By the one year later point, DJIA’s performance is mixed, higher only 55% of the time with meager average gains of just 0.89%.

Click here for full size table...

Small Caps are still the tell, my bet is STILL lower, tech is in trouble $IWM $AAPL $AMZN $FB $SPY $QQQ $DJIA

I have been saying that small cap stocks are the tell since the election when they soared 20+% and I went Bearish. Then as they have gone essentially NOWHERE for 6 months and the Bollinger bands are the tightest they have been in over a decade. 

And that continues to be the same story. Although this time it is a little different. After the action today I see 2 possible scenarios going forward and…

Over the past 27 years the DJIA and S&P 500 have declined 17 times and advanced 10 with an average loss approaching of about 0.75% near the end of March. Excluding advancing years, the average decline is right around 1.6% for DJIA and S&P 500. End-of-quarter portfolio restructuring likely plays a role as managers lock in any gains and establish positions for the next quarter. These declines can begin on either the fourth-to-last trading day or the third.

However, coming into this stretch with March down month-to-date as it is this year has mitigated losses on several occasions. Of the 7 times this DJIA was down MTD in March since 1990 month-end was up 5 times. For the S&P, the 7 down MTDs were followed by 4 gains. So perhaps the healthcare disappointment had managers restructuring a wee early and the next few days will be stronger than usual. Depends what comes out of DC though…

Below looks at the Dow Jones Transportation Index over the past 20-years. Before we discuss the chart below, let me be clear about this, the trend at this time remains up.

The focus of this chart is what the highs in 1999 and 2007 looked like. As you can see, in 1999 and 2007, the transports made attempts to breakout above old highs and each time it did make a "moderate new high" each time at (1). Then weakness came in, breaking support and selling picked up speed.

CLICK HERE TO ENLARGE CHART ABOVE

As mentioned earlier, the trend remains up in the transports and they are attempting to breakout to new highs. Would take very little gains to create a breakout.

As Transports are attempting to breakout, the current pattern looks a little like prior highs in 1999 and 2007 at (2).

Breakout above resistance at (2) = Positive move for this key sector.

Breakdown of short-term rising support at (2), could cause selling pressure to increase and could make the current pattern start looking all the more like 1999 and 2007.

The Nasdaq 100 is now testing its all-time highs first set way back at the peak of the dotcom mania in March of 2000. What I find particularly interesting is that the traders over at Rydex are just as bullish today as they were back then. Believe it or not, the assets don’t lie.

The NYSE just released the margin debt figures for the month of May and they continue to confirm the broad reversal in risk appetites I’ve been monitoring for months now. This should serve as a clear warning regarding the overall trend in stock prices.

After reaching record highs early last year, total margin debt reversed course and has been trending lower for about a year now. Because risk appetites, as measured by indicators like margin debt, normally trend along with the stock market this is a clear red flag for stocks.

Furthermore, the 12-month rate of change has now seen two months in a row with double-digit declines. This normally only happens when stock prices are also declining year-over-year so this is another red flag.

Finally, the level of margin debt-to-GDP is now reversing from record levels, as well. This might be the most valuable measure of all as it has been very highly negatively correlated with subsequent 30-month returns in stocks.

This last measure suggests that if investors using margin decide (or are forced) to pay down their borrowings, stock market returns over the coming 30 months could be very painful. Specifically, it forecasts a decline of 36% over that time.