Streaks Don’t Last Forever—In Basketball or in Markets
As college hoops pressure builds and mega-cap stocks lead a narrow rally, sentiment and history suggest growing downside risk.
You're reading 0 of 1 free page.
Register to read more or Unlock Pro — 50% Off Ends Soon
My husband and I are college basketball fans. For the last several seasons, we have gotten tickets to the St Louis University Men’s Basketball games. Mostly, they have been very mediocre. Until this year.
This year, they came out of the gate on fire and have now amassed a record of 20-1 with that lone loss way back during Thanksgiving week. Every game we attend, we think, okay, this will be the one they lose because we all know streaks don’t go on forever.
On Tuesday evening, we attended the game, and we could see, as soon as the game started, the players were on edge. Their shooting was off, with so many balls hitting the rim but not going in. Their rebounding was terrible, too. It was clear they felt the pressure of ‘the streak’.
At halftime, they were down by ten points. Fans were grumbling all around us.
In the second half, they started better, and about halfway through, they picked it up, eking out a win with a few seconds to go. Whew!
I bring this up because while I mentioned yesterday that the S&P was on a five-day winning streak, and my view is that these streaks tend not to last, we did, in fact, get a barely red day with the S&P down by half a point. Whew, get that out of the way.
But Nasdaq is another story. It has now been green for six straight days. The last time it went to seven was August of 2024. I figured for sure I would see one down day and then a resumption of the rally. I was shocked to see that is not what happened at all.
Let’s use the QQQs, and you can see that Nasdaq (the QQQs) went plop.
Then there is sentiment. The put/call ratio was .74 for the second straight day. That doesn’t tend to occur much these days. Yet using this metric, folks are quite bullish.
Using the Investors’ Intelligence Bull/Bear ratio, we find it is now at 3.99. No, it hasn’t gotten over that 4.0 level I keep harping about, but it’s awfully close. The last time it got over this level was the final week of October, and we know what transpired in November (you can see it on the chart of the QQQs above).
The time prior to that was July of 2024. Wait, didn’t we just look at the summer of 2024 above? Look at that chart of the QQQs again. July saw a swoon, then there was that early August run-up of seven green days, and then back down again.
You know what else happened in the summer of 2024? The Dollar was quite weak.
There is one more thing I’d like to point out. While Nasdaq has been on a tear of six straight green days (thanks to the mega caps coming back into vogue), the 493 have been red for three of the last five trading days. And it is the 493 where I expected the overbought condition to take hold.
We all like a winner. I know I will be sad when St Louis University’s streak comes to an end, but it seems to me the longer these streaks go on, the more vulnerable they are.
