The Dow Jones Industrials has a very interesting 20 year chart. We can derive meaningful conclusions from the Dow Jones long term chart in this article. In fact, we feature multiple Dow Jones long term charts like the 30 year, 10 year and 5 year charts.
Between 1998 and 2011, the Dow Jones traded in a sideways pattern, while before and after that period it was in a secular bull market. It is not really fair to say that the stock market is in a bubble right now. Also, the idea that stocks are overvalued is not a valid conclusion is what the Dow Jones 20 year chart suggests. We frequently update our annual Dow Jones forecast.
Most investors have the perception that the 2000 and 2007 tops were followed by bear markets. While that is absolutely correct from a tactical perspective (the damage created in the subsequent 18-24 month period was horrible) it is much more ‘nuanced’ on a secular timeframe.
That is why it is always recommended to look at long term charts. The Dow Jones Industrials is no exception, its long term chart shows a different picture than the shorter term charts. The longer time frame reveals much more than the short term time frames. Especially the Dow Jones long term chart on 20 years has some great insights for investors.
Dow Jones long term chart on more than 20 years
We take a top down approach in this article. We start with the longest timeframes, particularly the Dow Jones long term chart on 100 years and 30 years.
The Dow Jones historical chart on 100 years comes with a few take-aways:
- The Dow Jones reached the top of channel. Any time in the past this happened (1929, 2000, 2020) it resulted in massive market sell-offs. The one difference between now and back then is that those previous rises to the top of the channel came with very steep, multi-year rallies. The 2021/2022 test of the top of the channel did not come after a steep rally.
- For the first time in history, the Dow Jones exceeded the top of the 100 year channel. It happened between March of 2021 and April of 2022.
- At the time of writing, September of 2022, the top of the channel comes in at 35k points. The top of the channel will come in around 37k points (ATH) in the period Feb to April of 2024.
Note that we cannot derive detailed insights, certainly not medium term oriented predictions, from this ultra long Dow Jones chart.
Chart update: September 2022
Dow Jones long term chart on 30 years is a timeframe that comes with more actionable insights.
First of all, we see massive consolidation periods: 1997-2012 and 2016-today.
Second, the 2020 highs acted as support in 2022. Needless to say, the 28.8k level in the Dow Jones is crucial.
Third, in the current consolidation period we tend to see 3 levels, as indicated with the pink lines: 23k and 30k points. We believe both will be tested this decade, if not once than multiple times, whenever the next stock market crash occur it might bring the Dow Jones not only to 23k points but even 20k points (later this decade).
Chart update: September 2022
We do not see the Dow Jones trading at 40,000 in 2023 but it might happen in the timeframe 2024-2025. Remember, the top of the 100 year channel comes in around 37k in Feb/April of 2024.
Dow Jones long term chart on 20 years
In this paragraph, we feature the Dow Jones long term chart on 20 years. We keep the take-aways from the previous section in the back of our head.
What stands out on the Dow Jones long term chart on 20 years is the 5 ‘risk off’ periods since 2007. Every such period tended to last between 12 and 24 months. The ongoing ‘risk off’ period should come to an end in January of 2023 but not later than the 2nd half of 2023.
The Dow Jones Industrials Index is expected to move higher once this ongoing ‘risk off’ period is complete. We need a lower timeframe to understand when this would be and which price point is going to be the turning point.
Chart update: September 2022
The ‘line in the sand’ levels
As said in the previous sections, we strongly believe that the February 2018 lows and June 2022 lows are the line in the sand price levels. In particular, the 23,000 area and the 28,000 area in the Dow Jones Industrials Index are the most important levels to watch, not just in 2023 but also this decade.
Any monthly close below this area, as well as 3 to 5 consecutive weeks closing below this area, will be a major red flag for U.S. stock markets as well as global stocks.
As long as the ‘line in the sand’ area is respected we may see a continuation of the long term bull market that may have started in 2013.
In other words, the Dow Jones long term chart on 20 years learns that this ongoing bull market (1) may have started in 2013 (2) as long as it continues it might play out similarly to the early 90ies. As seen on the chart above there was plenty of upside potential in 1991. That was a very volatile year, admittedly, but in the bigger scheme of things it did represent a small blip, hardly visible, and a massive buy opportunity.
The point is this: as long as the Dow Jones Industrials continues to make higher lows and continues to respect the structure we find on the Dow Jones 20 year chart we are in a secular bull market. That’s an insight that is based on the long term pattern, and that’s why the Dow Jones long term chart on 20 years is so important.
Dow Jones long term charts on 5 and 10 years
What else can we find on the Dow Jones charts, although shorter timeframes than 20 years?
First, the Dow Jones 10 year chart comes with one really interesting insight. The long term moving average (90 weeks) is the one featured on the next chart. As seen, ‘risk off’ periods typically come with a period in which the Dow Jones trades for a certain period of time below its 90 week moving average.
In 2015/2016, it took the Dow Jones a double W reversal over 12 months. In 2018, the pull-back below the 90WMA took some 3 months. In 2020, it took the Dow Jones some 6 months below its 90 WMA.
In 2022, the Dow Jones fell below its 90 WMA in April. We can reasonably expect that the Dow Jones will clear its 90 WMA the latest in March of 2023. Note that the level to clear is 33.6k points, just 6% above the 31.7k points ‘line in the sand’ level we mentioned before.
Chart update: September 2022
The 5 year Dow Jones chart zooms in and gives some more nuance and detail. We can reasonably expect that 2022 will be all about a W reversal below the long term moving average, one that might take close to 12 months to complete.
Chart update: September 2022
Conclusions
This is what we conclude from the Dow Jones long term charts on 20 years, 30 years, 100 years:
- The top of the 100 year channel was reached. Although it came with a big sell-off every time it do so in the past (1929, 2000, 2020) we believe this time around it will not be as bad. The reason is that the rally that preceded is not as steep.
- The Dow Jones will likely trade in a wide range this decade: the 2017 lows to the 2021 highs.
- The line in the sand levels are 23k and 28k points. Other crucial price points, this decade, will be 31.7k and 33.3k.
- We do expect at least one market sell off in the next 3 to 4 years and the levels that will be tested could be 23k and maybe even temporarily 20k.
- On the flipside, we do see the Dow Jones clear ATH at a certain point. The Dow Jones 100 year channel will cross 37k points in Feb/April of 2024.
From the 10 and 5 year charts we conclude that 2022 will be all about creating a reversal below the long term moving average (90 week). It typically took the Dow Jones between 3 and 12 months to complete a bullish reversal below its 90 WMA. The Dow Jones fell below its 90 WMA in April of 2022 and should complete its bullish reversal the latest in March of 2023 IF history is going to be a guide. The latter is a conditional statement, the market can do anything it wants irrespective of what happened in the past!
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