The Dow Jones Industrial Average closed negative on Thursday, ending a 13-day winning streak during which the blue-chip index gained 5.3%. Unfortunately, it fell short of tying its longest rally on record, which was a 14-session run back in 1897.

However, it’s important to understand that regardless of whether the Dow achieved that 14th consecutive gain, it is statistically expected to experience occasional streaks like this. This is similar to the concept of the “Gambler’s Fallacy,” where people mistakenly believe that a unique streak in a roulette wheel has an impact on future outcomes. In reality, it’s natural for long streaks to occur from time to time.

We can even compare these streaks to the outcome of a coin flip.

HaberTusba conducted a simulated coin flip thousands of times, counting the number of consecutive “heads” outcomes. We can consider these as daily gains in the stock market. It’s important to note that these simulated events are completely independent, meaning the outcome of each flip is not influenced by the previous simulation.

Since its establishment in 1897, the Dow Jones Industrial Average has witnessed nearly 33,000 trading days. During this time, there was only one 14-day winning streak and two streaks that ended at 13 positive sessions in a row. The most recent 13-day rally occurred in January 1987.

In our simulation, where we flipped a fair coin 33,000 times and recorded the number and length of “heads” streaks, we obtained the same results as the real Dow: a single 14-day rally. When we introduced a slight bias towards “heads” (giving each flip a 0.523 chance of landing on heads), our simulation produced two rallies of 14 days and three streaks that ended at 13 days.

In the world of stock market speculation, experts often provide explanations for every market movement. However, by considering the 50-50 assumption of our theoretical coin, we can demonstrate that long streaks are not as extraordinary as they may initially appear.