By Mark Hulbert, MarketWatch
ANNANDALE, Va. (MarketWatch) -- It would appear that the stock market has built up enough momentum to keep the rally going for a while longer.
By rising for six straight sessions, in fact, the market possesses significantly above-average prospects of continuing to perform well over the next couple of weeks.
That at least is the conclusion I drew after analyzing all past instances in which the Dow was able to rise for six days in a row.
It turns out that, since the Dow Jones Industrial Average /quotes/comstock/10w!i:dji/delayed (DJIA 10,463, +76.06, +0.73%) was created in the late 1800s, there have been more than 600 instances in which the Dow's wining streak lasted at least six days. That's more than a big enough sample to support some interesting statistical tests.
| Dow's average gain over subsequent... | If the market has risen six sessions in a row... | If the market has NOT risen six straight sessions... |
| Week | 0.4% | 0.1% |
| Month | 1.2% | 0.5% |
On average whenever the market rose for six straight days, the Dow gained an additional 0.4% over the subsequent five trading sessions, in contrast to an average of just 0.1% over all other five-day periods. Over the subsequent month, the margin was 1.2% to 0.5%. These differences are significant at the 95% confidence level that statisticians often use to determine whether a pattern is most likely genuine.
Another indication of the stock market's recent momentum: Two of the last six trading sessions have been so-called "9-to-1 up days." These are sessions in which the ratio of the trading volume of rising issues to that of declining issues on the New York Stock Exchange is at least 9 to 1. The volume ratio for July 7 was an impressive 21 to 1, while Tuesday's ratio was 12 to 1.
To be sure, there have been lots of other "9-to-1 up days" in recent months -- so many, in fact, that they appear to have lost some of the bullish significance that they used to carry. There were five such days, for example, over the month ending June 10, and yet the stock market was nevertheless weak over the subsequent three weeks. ( Read Jun. 10 commentary about 9-to-1 up days.)
Furthermore, as Dan Sullivan, editor of The Chartist, pointed out Tuesday evening, the stock market is now overbought. So we should by no means expect the market not to face headwinds in coming sessions.
In fact, in only 10 of the more than 600 cases over the last 114 years in which the Dow rose for six straight sessions did it proceed to rise for six additional sessions as well.
Still, the market doesn't need to rise in every session to have a positive overall bias. Betting on the stock market is a matter of playing the odds, and the odds favor the bulls for the next couple of weeks.
Mark Hulbert is the founder of Hulbert Financial Digest in Annandale, Va. He has been tracking the advice of more than 160 financial newsletters since 1980.
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