$DJIA (CPI Adjusted) with Bear Markets Labeled
I am always finding interesting patterns and I post them to my Chat Room "Key Hidden Levels" here at TradingView.com where we point out trade setups using charts, news, earnings, and other tricks of the trading business.
This chart is the
DJIA or Dow Jones Industrial Average going back to the 1940's to show the 10 year Rate of Change (%) but adjusted for inflation since inflation was huge in the 1970's it is important to use inflation adjusted numbers. If you add in the fact that tax rates were 70%+ back then too, you can see that it was a particularly brutal time to be invested in the stock market. Yes, dividends were higher than today in percentage terms, but you didn't keep those dividends after taxes. The way to invest was for FUTURE dividend growth, which is how you should invest in stocks anyhow.
But that's not my point here. Here's my point - if you look at the times when the 120 month (10 years) RATE OF CHANGE reaches the +200 level (which is 200% change in price over 10 years), you can see that the market has been able to hold that level in future pullbacks as a level of support.
So what seems logical is that a wave of buying for 10 years doesn't mean the "end" of a trend simply because prices have gone up so much, but rather that wave of buying means people are optimistic and looking towards a brighter future and investing to make the future brighter.
In 1973's peak and 2007's peak there were the same draconian changes to banking regulations that led to a collapse in lending, so those CHANGES to the structure allowed the market to violate that support.
In 1992 the market was just launching on a technology boom in servers, computers, modems, and the internet along with global sourcing and trade, that it was just the beginning of a major upswing that we are enjoying today.
I also added many of the large losses to the chart to highlight that stock markets are volatile and can go down a lot in short periods of time.
The 1966-1982 correction was 74%.
The 1968-1970 correction was 41%.
The 1973-1974 correction was 55%.
The 1976-1980 correction was 49%.
The 1976-1982 correction was 56%.
The 1980-1983 correction was 32%.
On the next chart I will past the market action after this strong level of +200% gain in the market after 10 years. I also put a white box to highlight the START of the time from +200% to the lowest level in price over the following 4 -6 years for reference.
All the best,
Tim West
May 17, 2019. 11:01AM EST
The 1987-1987 correction was 41%.
The 1990-1990 correction was 24%.
The 2000-2002 correction was 42%.
The 2000-2008 correction was 56%.
The 2012-2012 correction was 20%.
The 2015-2015 correction was 16%.
This chart is the
DJIA or Dow Jones Industrial Average going back to the 1940's to show the 10 year Rate of Change (%) but adjusted for inflation since inflation was huge in the 1970's it is important to use inflation adjusted numbers. If you add in the fact that tax rates were 70%+ back then too, you can see that it was a particularly brutal time to be invested in the stock market. Yes, dividends were higher than today in percentage terms, but you didn't keep those dividends after taxes. The way to invest was for FUTURE dividend growth, which is how you should invest in stocks anyhow.But that's not my point here. Here's my point - if you look at the times when the 120 month (10 years) RATE OF CHANGE reaches the +200 level (which is 200% change in price over 10 years), you can see that the market has been able to hold that level in future pullbacks as a level of support.
So what seems logical is that a wave of buying for 10 years doesn't mean the "end" of a trend simply because prices have gone up so much, but rather that wave of buying means people are optimistic and looking towards a brighter future and investing to make the future brighter.
In 1973's peak and 2007's peak there were the same draconian changes to banking regulations that led to a collapse in lending, so those CHANGES to the structure allowed the market to violate that support.
In 1992 the market was just launching on a technology boom in servers, computers, modems, and the internet along with global sourcing and trade, that it was just the beginning of a major upswing that we are enjoying today.
I also added many of the large losses to the chart to highlight that stock markets are volatile and can go down a lot in short periods of time.
The 1966-1982 correction was 74%.
The 1968-1970 correction was 41%.
The 1973-1974 correction was 55%.
The 1976-1980 correction was 49%.
The 1976-1982 correction was 56%.
The 1980-1983 correction was 32%.
On the next chart I will past the market action after this strong level of +200% gain in the market after 10 years. I also put a white box to highlight the START of the time from +200% to the lowest level in price over the following 4 -6 years for reference.
All the best,
Tim West
May 17, 2019. 11:01AM EST
The 1987-1987 correction was 41%.
The 1990-1990 correction was 24%.
The 2000-2002 correction was 42%.
The 2000-2008 correction was 56%.
The 2012-2012 correction was 20%.
The 2015-2015 correction was 16%.
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