×

Eight down days in a row for the stock market — a coin flip can do that

Through the close of trading Thursday, the S&P 500 had been down eight consecutive days in a row. It's a rare feat, happening only twice in the last 20 years.

Whether or not the index closes down Friday (for the ninth day in a row), or finishes up to start a new positive streak, basic probability tells us that we would get these long streaks every once in a while. It's like a basketball team over the course of a season, a perfectly average team might still have a long losing or winning streak.

In the case of the stock market, we can show that its streaks aren't any different from flipping a coin. In fact, when we did simulate thousands of coin flips on a computer, we got the same number of long streaks as the real stock market has in the past 66 years.

Since the beginning of 1950, there have been about 17,000 trading days. We've seen a few streaks reach 10 or more days in a row, both positive and negative. The really long streaks happened more often in the 1960s and '70s — since the '80s they've become much more rare.

But if we flipped a coin 17,000 times, each flip representing one day in the stock market, we'd get almost the exact same results.

Look at the chart below. The number of streaks at any given length — in either direction — is effectively the same for a coin flip as it is for the stock market.


(To be fair, the market isn't exactly a 50-50 proposition, like a coin would be. A brief analysis of our data suggests the market moves up 53 percent of the time, going back to 1950. But just using the 50-50 assumption to compare our theoretical coin and the market shows that these occasional long streaks are nothing to be surprised about.)

As market pundits and prognosticators love to put reasons behind every single move, it's totally possible that sometimes a streak is just random chance.