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Dow Set to Do This for First Time in 8 Years

Andrea Kramer

While the major stock market indexes are higher today, they're still on pace for another week in the red. In fact, amid escalating concerns about U.S.-China trade, the Dow Jones Industrial Average (DJI) is pacing for a fifth straight Friday-to-Friday loss -- something we haven't seen since 2011. What's more, if history is any indicator, the blue-chip index could be vulnerable to more selling pressure in the short term.

Specifically, the last time the Dow suffered a five-week losing streak was in June 2011, nearly eight years ago. After that, the index dropped another 7.5% in the subsequent three months, per data from Schaeffer's Senior Quantitative Analyst Rocky White. Prior to that 2011 streak, the last five-week losing stretch was nearly 15 years ago, in July 2004. The longest ever weekly losing streak was in 1923, at eight weeks.

dow 5-week losing streaks

Since 1900, there have been 62 five-week losing streaks for the Dow. Afterwards, the index managed at- or above-average returns over the next month. However, at the three-month marker, the Dow was down an average of 0.34%, and was higher just 51.6% of the time. That's compared to an average anytime gain of 1.74%, with a win rate of 61.1%, looking at DJI stats since 1903. Plus, volatility ran hotter after five-week losing streaks, per the Standard Deviation stats below.

Dow after streak vs anytime since 1900

During the current losing streak, the Dow has surrendered less than 5%. Since 1900, there have been just eight similar streaks, after which the blue-chip barometer also experienced weaker-than-usual price action.

One week later, the index was down 0.65%, on average, and snapped its weekly losing streak just 37.5% of the time. That's compared to an average anytime one-week gain of 0.13%, with a win rate better than a coin flip, looking at data since 1903. It's a similar situation two weeks out, with the DJI averaging a loss, compared to an average anytime gain.

One month later, the Dow was down 0.8%, on average, and higher just half the time. That's compared to an average anytime one-month return of 0.52%, with a better win rate of 58.4%. And while the index averaged a gain three months out, it's a slim 0.15%, and pales in comparison to the Dow's average three-month gain of 1.74%.

Dow after losing streaks down less than 5 percent

In conclusion, almost any way you slice it, five-week losing streaks tend to precede weaker-than-usual near-term returns, and that's especially true when the index surrenders less than 5% in those five weeks. However, as has been the case lately, the stock market's short-term trajectory will likely be determined by U.S.-China trade relations, so a thaw between the two nations -- or word of confirmed talks scheduled around next month's Group of 20 (G-20) summit -- could help the Dow buck historical headwinds.