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Hulbert: Tech Stock Run a Bullish Omen

By    |   Wednesday, 22 Jul 2009 01:49 PM

Investment guru Mark Hulbert writes that the Nasdaq composite is on a "winning streak," one of 67 such streaks since 1971. As of the close on Tuesday, at 1,930, the tech-heavy index is up 13.95 percent and had risen for 10 straight sessions.

The editor of The Hulbert Financial Digest said that more winnings are to come for investors.

Given history, it is likely that there will be another winning streak on Nasdaq this year. Hulbert notes that the 67 winning streaks during the last 38 years, "works out to somewhat shy of two a year, on average."

The current streak, at 10, is barely above half the all-time record for the Nasdaq Composite Index, which came in at 19. "That occurred in August 1979," writes Hulbert.

Lengthy winning streaks for the Nasdaq index have been rare in recent years. The last time it happened, in fact, was July 1997, a dozen years ago, during the dot-com boom.

"During the three months leading up to the bursting of the Internet bubble in March 2000, in contrast, the longest winning streak the Nasdaq was able to muster was just seven," writes Hulbert.

Does the current win streak means anything in terms of strategy for investors?

"To find out, I entered the nearly four decades' worth of history for the Nasdaq Composite into my PC's statistical software," Hulbert notes.

"Some modestly good news emerged: Following long win streaks, the Nasdaq Composite tends to turn in above-average performance over the subsequent weeks and months."

The Nasdaq Composite's average gain over the subsequent month following past occasions in which this index rose for at least 10 straight sessions: A gain of 2 percent, in contrast to an average monthly gain of 0.8 percent the rest of the time.

"Part of this above-average return can be attributed to the tendency for long win streaks to persist. Of the 67 past instances in which the Nasdaq win streak reached at least 10, for example, it continued for at least one more day in 39 cases — more than half the time.

But even when the win streak stopped at 10, the stock market still tended to be higher in a month's time," Hulbert noted.

The bullish implications of the recent win streak could be decidedly short-term, however.

The recession is to blame for that, making earnings growth appear better than it actually is at many publicly traded firms.

"Earnings expectations have come down so much," writes Jacqueline Doherty in Barron's magazine, that companies "have started to beat them."

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Investment guru Mark Hulbert writes that the Nasdaq composite is on a "winning streak," one of 67 such streaks since 1971. As of the close on Tuesday, at 1,930, the tech-heavy index is up 13.95 percent and had risen for 10 straight sessions. The editor of The Hulbert...
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2009-49-22
Wednesday, 22 Jul 2009 01:49 PM
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