History to the rescue?

Five straight down weeks for the Dow.  This is getting ridiculous.  It's starting to look like my prediction last week that the end (of these declines) was near might have been premature.  Or was it?

I had to go back to June of 2004 to find the previous instance of five losing weeks in a row.  We never even had a run that bad during the entire period of the Great Recession.  Before 2004 though, there was a run of six straight down weeks in the summer of '02 (remember those fun times?) when the Dow went from 9017 down to 7461, a 17% drop.  In fact there were two six week losing streaks in 2002.  1999 had one too.  1997 had a 5 week streak.  Then you have to go back to 1984 for another 6 week streak.  There was one awful seven week losing streak back in 1980; another 6 week one in 1977, and a 5 in 1973, which is where I got too depressed and stopped looking.

So in the last 38 years, or 1,976 weeks, the longest run of straight losing weeks was one instance of seven, then six instances of six week streaks, and three instances of five week streaks (not counting the one we're in now).  Using this as a guide, history would seem to indicate that the odds favor an up week ahead.  Only 7 times out of the last 1976 weeks has a losing streak gone longer than five weeks in the Dow.

And looking to tomorrow, there is (for once) no major economic news coming out.  Since that news has been mostly bad lately, that's one less excuse for the market to tank.  We also have indicators that are entering extremely oversold territory.  The Dow's momentum now stands at minus 454.  The last time it hit that level was at the very bottom of the March Japan-induced sell-off.

Then the VIX hit its upper Bollinger band again last Friday.  Every time it has done that in the last two years, the VIX has gone lower either the next day or the day after that.  In addition, the ES futures have been wandering about the flat line in Sunday evening trading and are now at 1296.25.  They have some fairly good support at 1291.  The next support level in the Dow meanwhile is only the psychological 12,000 level, just 151 points away.

Also note that the Morningstar Market Fair Value Indicator  has declined again to stand now at 0.99, slightly below fair value.

That said, we remain firmly entrenched in descending regression trend channels in both ES and the Dow with no signs of any candlestick reversals.  So some more downside is still possible for tomorrow, but there's only a 7 out of 1,976 chance that the entire week will end lower.  I almost hesitate to say it because I was badly wrong last week, but this sort of decline can't go on forever.  And that said, the monthly charts are a different story, and they're not pretty.  But this is long enough now, we'll go into that later.

Important numbers to watch on Monday: pay attention to the ES.  If it breaks support at 1291, that's bad.  If it breaks above its daily pivot of 1301.42, that's good.