Image Source: Pexels

And this stock market winning streak comes after a 4 day sell-off, and just just a couple of weeks later, the market have finished off an 8 day winning streak.

It kind of feels like this market is beholden to nothing but streaks these days and why is that?

I think some of it is coming from the 0DTE traders (options contracts with zero days to expiration) where traders are consistently manufacturing gamma squeezes out of the people writing the calls, which thereby artificially inflates the market not because there is perceived value in the market but because option writers are essentially hedging their positions by purchasing shares of the underlying contract that they are writing.

That’s not the only thing though as the stock market winning streak also has plenty to do with stock buybacks, though I will say that this latest winning streak has much less to do with that, as most of the heavy hitters are in a black out period (typically 6 weeks before earnings) where they aren’t buying back their shares. But if you go back to August 5th, when the market bottomed, there is no doubt in my mind that Apple (AAPL) was buying its stock hand over fist.

Then of course there is the passive investing always funneling into the market – whether it is 401(k) money or pensions, it always provides a baseline for the market to operate from. That makes it to where unless there is a major news event or headline risk permeating the market mood, it becomes very difficult for the market to go down.

Besides you have a new generation of traders that view the stock market as a money tree because they’ve never been through the horrors of a real recession that makes you question whether the stock market will ever survive the day.

The regularity of winning streaks seem as consistent as the streaks themselves
 

I estimate that we are about 180 trading days into the new year and during that time, the stock market winning streaks of at least 6 days for over 50 days so far this year. That is about 27% of the time we are trading we are experiencing a significant winning/losing streak. Again, I think that goes back to 0DTE traders, the buybacks, and passive buying consistently providing a floor for this market, and in the absence of anything negative the market simply melts higher.

Also a lack of fear encouraging the constant buying
 

Also notice the lack of sell-offs that involve a streak of six or more days. Out of the 7 listed on the chart above, six them involve rallies. There is simply a lack of fear in this market and most people have come over the last 15 years for the stock market to always bounce back in quick order.

However, the FOMC could change things
 

I’m not predicting glom or doom by any means, but the complacency in this market is running hot, and it wouldn’t surprise me if there is a rug pull for investors following the FOMC Statement getting released. Personally, I’ve been tightening up the portfolio, and curbing my risk ahead of tomorrow’s FOMC. I didn’t take any trades today, simply because the tape wasn’t favorable at all, and it made zero sense, with the market at all-time highs to put myself in a position where a trade today is stopped out tomorrow, all because of something stupid that Jerome Powell said.

So I sat on the sidelines, let my currently positions do their thing, and I’ll wait until after the presser tomorrow before making a move on this market.

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