Nasdaq Could Do This for the First Time Since 1989

The Nasdaq Composite (IXIC) earlier notched another record high, peaking not even a point below the round 6,600 level, but has since pulled back to dance around breakeven. Should the tech-rich index eke out a win, it would be a 10th straight -- matching the Nasdaq's Julywinning streak, and marking a feat accomplished just two other times since the 2009 stock market bottom. As such, we decided to take a look at what to expect from the Nasdaq after two straight weeks of gains.

Nasdaq Eyes Smallest 10-Day Rally Return Since 1989

Below are the IXIC's past 10-day winning streaks, going back to 1971, with data courtesy of Schaeffer's Senior Quantitative Analyst Rocky White. Around current levels, the Nasdaq is poised for a gain of roughly 3.42% during its most recent winning streak, which would mark the smallest return during a 10-day rally since 1989.

Nasdaq Could Rally Into November, If Past is Prologue

As you can see above, the index's July 2017 rally preceded a 2.72% pullback over the subsequent month, and the Nasdaq dropped 1.84% a month after its February 2015 run. However, only four out of 31 times was the Nasdaq in the red one month after a 10-day winning streak.

In other words, the Nasdaq was higher 77.4% of the time one month after its past 10-day winning streaks. The index also generated a one-month gain of 2.21% after these signals -- much stronger than its anytime one-month return of 0.93%, with just 60.7% positive.

In fact, one and two weeks after these streaks, the Nasdaq outperformed, with a win rate of 74.2% and returns that more than double the norm. Three months after a signal, the Nasdaq's average return of 2.38% was slightly less than usual, but the index was in the black 70% of the time, compared to 64.2% anytime. So, in a nutshell, it looks like strength tends to beget strength for the IXIC in the short term.

11-Day Winning Streaks Are Rare for IXIC

The last time the index enjoyed an 11-day winning streak was in July 2009, when the stock market was rallying off what we now know to be the March 2009 lows. That streak extended for 12 days and generated a return of 13.02%. In fact, it's interesting to note that the 2009 rally was the only time since the turn of the millennium that the Nasdaq has enjoyed an 11-day winning streak. Below are the longest ever Nasdaq winning streaks, led by a 19-day run in 1979.

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