Thursday, April 9, 2015

Nasdaq - Post Streak Update #2

On February 24th, the Nasdaq completed its 10th and final day of an uninterrupted uptrend.  That day, we posted a study looking at how the index had performed after similar streaks in the past. The data suggested that buying after such bouts of strength (during the current bull market) had not been rewarded on a near term basis.

As seen below, we considered all instances where the Nasdaq had been up at least 8 days in row and then showed how the index had performed on average when looking 5, 10, 20 and 50 days out.  We worked under the assumption that you bought the close on the last day of the streak.  We then showed the outcomes relative to just buying the Nasdaq on any given day since the 2009 bottom.

+5Days Nas +10 Nas +20 Nas +50
Buying the Last Day of the Winning Streak -0.14% -0.03% -0.13% 1.28%
Whole Sample 0.46% 0.91% 1.76% 4.09%

We then then followed up on that study with a note on March 17th to offer a post-streak status update. At that point, we were 15 market days since the streak's end and the index had scuffled to a -0.61% loss.  A slightly greater loss, albeit still minimal, than what the average of the other instances had suggested.

Yesterday marked the 30th day since the streak's end and it's time for another status update.  The index closed on Feb. 24th at 4,968.12 and here's what's happened since:

-Day 5 (March 3rd) - Nasdaq closed at 4,979.9 for a gain of 0.237%-Day 10 (March 10th) - Nasdaq closed at 4,859.79 for a loss of -2.181%

-Day 20 (March 24th) - Nasdaq closed at 4,994.73 for a gain of 0.53%

-Day 30 (April 8th) - Nasdaq closed at 4,950.82 for a loss of -0.35%

So while the Nasdaq has not held exactly true to average expectations, the theme remains in tact: the index has stalled out once again after stringing together an impressive up-trend.  Yet another reminder that buying strength/momentum continues to be challenging in this market.

We've got another month or so until we can run the 50-day measurement and there is some work to be done to the upside if the index hopes to keep on a similar track.

We'll revisit this once we've hit day 50.

Ryan Worch is the Managing Director of Worch Capital LLC. Worch Capital LLC is the general partner of a long/short equity strategy that operates with a directional bias and while emphasizing capital preservation at all times.

Ryan on: Ryan Worch on LinkedIn, Ryan Worch on Twitter | Ryan Worch Bio