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Sometimes you witness market history in real time, and you don’t even realize it until you dig into the numbers over the weekend.
That’s exactly what happened to me recently. I was analyzing the Nasdaq 100 (QQQ) and its incredible 13-day consecutive winning streak, which coincided with 12 to 13 consecutive higher closes on the S&P 500 (SPY).
When I pulled up the historical data, I discovered something remarkable: This kind of streak hasn’t happened since 1950.
We’re talking about the 100th percentile of bullishness here. If you visualize a distribution of market gains and losses, with risk to the downside on one end and gains to the upside on the other, what we just witnessed was the market gaining over 10% in roughly three weeks.
That’s way, way out on the extreme end of the distribution.
Some of this behavior has been fueled by short-term expiration trading, the 0-4 day and 0-7 day weekly options that create rapid directional moves and buying frenzies. In a good way, we just witnessed history.
In a not so good way, I’ll admit I was annoyed that I’d been fighting it.
What It Took to Break the Streak
Here’s where the math finally met the market…
For this win streak to have extended to a nearly impossible 14th day, the market would have needed to close Monday above Friday’s high-water mark of 26,672 on the Nasdaq (NDX).
But as the opening bell rang this week, that statistical gravity I’ve been talking about finally took hold. The streak didn’t just pause, it snapped.
The reality is that extending a run like this is a statistically “tail risk” event. That is exactly why I’ve been positioned to capitalize on the break rather than the continuation.
While the buying frenzy was historic, the reversal to more normal behavior was inevitable.
Trading the Extremes With Defined Risk
I’ve been using bear call spreads positioned well above the expected move, selling premium at levels like 26,900 on NDX.
By placing these spreads significantly above the previous close, I created a high probability structure that didn’t require me to call the top perfectly. I just needed the market to stop acting like a vertical line.
Rather than taking unlimited risk short positions, these defined risk spreads allowed me to profit from this mean reversion while capping my downside if the market decided to push into a 15th or 16th day.
What makes this setup compelling isn’t just seeing the extreme, it’s having the discipline to wait for the math to play out. With earnings heating up this week, the shift in sentiment is already here.
A technical retracement into the 38% to 50% zone would mean retesting the levels where this rally originally gapped higher.
That’s the “normal” price behavior I’m prepared for, and it’s why I’m glad I stopped fighting the trend and started trading the probability.
I’ll see you in the markets.
Chris Pulver
Chris Pulver TradingÂ
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*This is for informational and educational purposes only. There is inherent risk in trading, so trade at your own risk.Â
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