A Historic Bull Signal From an Unlikely Place By Lucas Downey, Contributing Editor, TradeSmith Daily Last week, I drew your attention to the “car crash” happening in the stock market. In never-before-seen fashion, value stocks had fallen a record 10 days in a row. There I highlighted how now is a perfect time to strap on your helmet and start buying high-quality stocks amid the sell-off. Well, that pain now continues to spread throughout other areas of the market. You’ve probably seen the headlines hitting the airwaves lately: The Dow Jones Industrial Average fell 10 days in a row… something that hasn’t happened since 1974. That’s a clickable headline if you ask me! But headlines alone rarely offer value. At TradeSmith, we prefer to study these anomalies and generate powerful actionable analysis. So let’s see what history says about stocks given this historical drawdown… You’ll be surprised with what we found… The Dow Falls 10 Days in a Row The equity seas have been stormy lately. The Dow fell nearly 6% over the 10-day period from Dec. 4 to Dec. 18. Every one of those days, it closed negative. Below is a snapshot of the SPDR Dow Jones Industrial Average ETF Trust (DIA). I’ve circled the rare two-week pullback: 
It’s easy to see a meltdown and think, “I’ll sit this one out until the coast is clear.” But history says you’re likely making a costly mistake. Today’s signal study is quite similar to the one I did for the S&P 500’s six-day pullback in April titled, “This Buy Signal Is Undefeated Since 2008.” Back then folks couldn’t see a market heading higher. We relied on data… and as they say, the rest is history. Since April 19, the S&P 500 (SPY ETF) is up a staggering 19%. Today we’ll showcase a similar analysis on the DJIA… Going back to 1942, there were only a handful of times that the Dow dropped 10 days in a row. But I was able to find 17 instances when it fell nine consecutive days. To be clear, a subset of these findings also includes 10-day consecutive declines. The forward performance doesn’t change much. As you’ll see, you don’t want to buy into the fearful narratives. Instead, you’ll want to buy this beaten-down index. Since 1942, whenever the Dow falls nine days consecutively, here’s what happens next: - Three months later, stocks jump 4.4% on average
- Six months later, stocks gain 12.7%
- 12 months later, stocks have ripped a market-beating average of 18.3%
So much for scary headlines: 
And if you’re wondering what happened the last time this benchmark dropped nine sessions in a row back in 1978, have a look: - Three months later, the DJIA rallied 14.2%
- Six months after, stocks flew 19.1%
Possibly the biggest takeaway of the 17 prior instances is this: Stocks were higher 100% of the time six and 12 months out. If this study doesn’t get you excited, I’ll add to it. Remember when I said it’s time to buy stocks in November? Just six weeks ago, we showcased how November through April is a seasonally bullish period for small-, mid- and large-cap stocks. Turns out, this seasonal pattern also benefits the DJIA. By utilizing the TradeSmith Seasonality tool, I learned that the Dow-tracking ETF (DIA) rises an average of 6.8% from Oct. 31 through April 30 going back 26 years. And the accuracy rate is an impressive 80%: 
These two signals together make a solid one-two punch to own equities right now. You can check your stocks for reliable seasonal patterns too, by the way, by registering here for free access to TradeSmith Seasonality. Our CEO, Keith Kaplan, asked that we make it available ahead of his upcoming webinar on the strategy on Jan. 8 at 10 a.m. Eastern. You can essentially plan out an entire year of trades this way – see for yourself at this link. The simple way to play this theme is to buy DIA for a bullish wager. But you can do better… a lot better. Why own the entire basket when you can lean into all-star stocks in the basket? One name I’ve discussed numerous times before is superstar Nvidia (NVDA). It’s taken Wall Street by storm the last few years, and that trend isn’t slowing. The three-year chart highlights the powerful uptrend: 
One reason to love this company is simply due to its fundamental outlook. In fiscal year 2024, Nvidia saw $60.9 billion in revenue. Sales are projected to more than triple in fiscal year 2026, with expectations of $197.3 billion. Net income over the same timeframe should grow from $29.7 billion to over $107.2 billion. That’s a staggering growth rate. But what makes this company worth investigation today is its rock-solid Quantum Score of 72.4. Any reading above 70 makes the green zone. This all-encompassing score gives you the overall technical, fundamental, and institutional sponsorship analysis. Nvidia is rated a buy: 
Folks, there’s opportunity in pullbacks… especially those long, painful 10-day pullbacks. You just need cutting-edge software like TradeSmith’s to spot the opportunity. Jason Bodner’s Quantum Score is an incredible tool that you can use to instantly know if a stock is a buy or a pass. You can score any stock once you’re a member of his Quantum Edge Pro service that’s finding market-beating, under-the-radar stocks loved by institutions. Today’s study is simple. The Dow has fallen 10 days in a row. The data says that’s a historic buy signal. Now go buy great stocks! Happy holidays everyone! Regards, Lucas Downey
Contributing Editor, TradeSmith Daily | 
