The Dow Jones Industrials has a very interesting long term chart from which we can derive meaningful conclusions. In fact, what we have found out is that a top-down approach of the Dow Jones long term charts delivers some really valuable insights. Stated differently, if we look at Dow Jones long term charts on multiple timeframes, we get many more incremental insights out of the Dow Jones 20 years chart. Combined with directionally bullish 2024 forecasts,
[Ed. note: Last update November 2023. We originally wrote this article in September of 2022 but we update charts and commentary every other month. The charts and commentary mention the month of the last update.]
Dow Jones in 2024 – no secular turning point
The single most important fear of investors is the fear of a stock market crash.
That’s why we want to start off by looking at a potential bearish secular turning point that may occur in 2024.
Let’s review conclusions and observations from recent writings.
The answer to the question “will stocks tank or even crash in the first half of 2024” can be answered by (a) leading indicator TIP ETF should not print more than 3 monthly candles below 105 points (b) volatility index VIXY should not print more than 5 daily candles above 27.2 points.
The answer to this question will be clear well before 2024 kicks off. The long term chart of XLI will have the answer before January 2024.
While the above two points are not meant to represent an exhaustive analysis, on the contrary in fact, we can confirm that markets are moving in the right direction, i.e. confirming that the first quarters of 2024 will be bullish for stocks. That’s why we believe that the Dow Jones Industrials in 2024 will do well, for sure the first 4 to 5 months of the year.
Dow Jones long term charts +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 updating this article, in November of 2023, the top of the channel comes in at 35.5k points. The top of the channel will come in around 37k points (ATH) in the period Feb to April of 2024. As our 2024 forecast is bullish for stocks (bullish bias, limited bullish momentum) we do believe that this will be the first time in history that the Dow Jones will be trading for such a long time near the top of its 100 year channel.
Note that we cannot derive detailed insights, certainly not medium term oriented predictions, from this ultra long Dow Jones chart.
Chart update: November 2023
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. In our previous update, in June of 2023, we said: “We believe 30k might be tested this decade.” Interestingly, a few months later, in October of 2023, the Dow Jones cam quite close to testing 30k. It fell to 32,380 points. Our viewpoint, in November of 2023, is that this is a higher low against September of 2022, making it unnecessary to test the 30k level again.
Chart update: November 2023
We do not see the Dow Jones trading near 40,000 before the end 2023. However, we believe there is a real possibility that the Dow Jones will test 40,000 before the summer of 2024. For sure, we expect 40k in the Dow Jones to be exceeded late 2024 and in 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. In doing so, we work with the take-aways from the previous section.
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.
By combing the insights from the Dow Jones charts +20 years with the one below, we conclude that there is a high probability that the Dow Jones will move to 37k points in the first half of 2024 (where it will test the ‘end of the risk off structure’ and also the 100-year channel). We can reasonably expect a quick pullback, followed by a secular breakout later in 2024 or 2025. This is how we combine insights from the multiple timeframes with the Dow Jones long term chart on 20 years.
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 less than 20 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.
As we add commentary in November of 2023, we do see how the Dow Jones keeps on trading around its 90 WMA, for 6 full months. In June of 2023, we wrote: “One last sell-off might occur around the start of the summer of 2023 before the reversal confirms its bullish intent and resolves higher.” Interestingly, that’s exactly what we got, in Sept/Oct of 2023. We believe, at the time of writing, that the Dow Jones is ready to move higher, and ‘kiss its 90 WMA goodbye’.
Chart update: November 2023
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.
As we add commentary in November of 2023, we see a successful re-test of the 2023 lows around 32k points.
Chart update: November 2023
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 (presumably temporarily). We believe a mini-version of the Corona-crash might occur in the first half of 2024
- 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.
- As we add commentary in November of 2023, we see a successful test of the 90 WMA. The market is ready to move higher, the Dow Jones is ready to successfully clear its 90 WMA.
From the 10 and 5 year charts we conclude that 2022 was 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 (which was confirmed as we add commentary in November of 2023).
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