#$dow

After a mixed opening day, government shutdown woes and AI valuation concerns knocked the market down through the first five trading days in November. Compared to November’s typical first five trading days over the last 21 years, this year was essentially the opposite. However, the bull market still appears alive and still kicking today with DJIA closing at a new all-time closing high and is now up 0.77% in November. With today’s modest gains, S&P 500 and Russell 1000 are also positive in November, up 0.09% and 0.07% respectively. NASDAQ and Russell 2000 are the worst performers this month, down 1.08% and 0.85%.

It’s usually about this time of the year, when trading volumes begin to slump and markets meander that we begin to hear talk of the infamous “Summer Rally” featured on page 74 of the Stock Trader’s Almanac 2019. The “Summer Rally” is usually the weakest seasonal rally of them all.

We looked at the current Summer Rally and found it to be above average already, up 10.2% from the Spring low on May 31, and that does portend well for the Summer and Fall Corrections. We lined up the Summer Rallies ranked from weakest to strongest since 1964. Over the past 55 years prior to this year DJIA has rallied and average of 9.1% from its May/June low until its Q3 high. The Fall Rally averages 10.9% and the Summer and Fall Corrections average a loss of just under 9% for a net average gain of a few percentage points over the summer and fall.

As shown in the table below, when the Summer Rally is greater than or equal to the 55-year 9.1% average, the summer and fall correction tend to be bit milder, -6.2% and -8.2%, respectively. Summer Rally gains beyond 12.5% historically had the smallest summer and fall corrections. One prominent exception being 1987.

Bowlers and fans of bowling have created many names for streaks of strikes. Two in a row is called a Double, get three in a row and it’s a Turkey. String together three Turkeys in a row or nine straight strikes and you have a Golden Turkey or a nine-bagger. DJIA did exactly this last Friday when it closed with its ninth straight weekly gain. Since 1901 DJIA has accomplished this feat just 13 times including the current streak. In the following table the current streak along with the previous 12 streaks appear with DJIA’s performance over the following 1-, 3-, 6- and 12-month periods.

Click here to view full-size

As you can see, the current streak is not the longest on record. DJIA racked up a 14-week streak in 1965, however the current streak is second best by return at nearly 16%. Historically, when streaks of this duration came to an end performance one month later was something of a mixed bag with DJIA higher just 50% of the time. Average and median performance was negative one month later. By 3 months later DJIA was modestly better, but truly solid results were not observed until a full 6 months after the streak ended. One year later was good, but not stellar with DJIA up 75% of the time with a 9.86% average gain.