The Dow Jones Industrials Index (DJI) is the most known and oldest stock market index. The Dow Jones historical chart on 100 years has a breathtaking chart pattern. As part of our charts analysis, and our aspiration to host the coolest long term charts in the world we feature our analysis on the Dow Jones historical chart on 100 years in this article. To us, it suggests either a major top is being set in 2019 or a ‘new normal’ with moderate but continuous gains in U.S. stock markets.
The Dow Jones Industrials Index was founded on February 16th, 1885, as per Wikipedia. The index tracks 30 large, publicly owned companies based in the United States.
The Dow Jones organisation grew over time and now has lots of financial media in its group, think of MarketWatch and Barron’s.
Stock market overvalued or not?
Many are talking about extreme valuations of stock markets. The Dow Jones historical chart on 100 years suggests that U.S. stocks are not valued at extreme levels. It suggests that this is momentum in stock markets.
It does not tell anything about a correction, or timing thereof. Many fear a stock market crash but a long term chart like the Dow Jones historical chart on 100 years is not necessarily going to confirm any of this.
Looking at the 100 year chart of the Dow Jones it becomes clear how strong the uptrend has been in recent decades. It also becomes clear that more upside is certainly in the cards while downside potential is not necessarily bearish long term.
This may sound too vague or opaque, admittedly, so let’s explain what we derive from the Dow Jones historical chart on 100 years.
Dow Jones historical chart on 100 years: Distinct phases
Basically, between 1932 and 1966, the Dow Jones index has risen 10-fold.
Buying in 1966 would have been catastrophic for one’s portfolio. That is because the Dow was trading in the upper area of its long term channel. The Dow corrected combined with sideways trading during 2 decades only to test support levels multiple times. As of 1984, the Dow went in almost one straight line up until the year 2000.
Between 2000 and 2013 the Dow has traded in a wide range.
In 2013 a triple top breakout took place. Arguably, that’s the moment when the stock bull market started, not March 2009.
Right now, the Dow Jones Industrials Index is trading in its upper band of its long term rising channel. It does not trade at an extreme level though, it is some 25% to 30% below extreme levels.
Dow Jones historical chart on 100 years: What’s next
It is tough to forecast future U.S. stock market direction solely based on the Dow Jones historical chart on 100 years.
For future directions we use our proprietary method as explained in 15 Leading Indicators For The Dominant Market Trend. Essentially, it is a combination of leading indicators like 10-year Yields, currencies, as well as indicator indexes like the Russell 2000 that help forecast future stock market directions.
However, there are 2 future scenarios we can potentially see in the Dow Jones historical chart on 100 years.
- The Dow Jones Industrials Index has reached the upper area / band in its very long term rising channel since 2017. This happened only twice before: in 1929 and 2000. Given that this happens so rarely it may suggest that this is a major top in the making which will resolve to the downside.
- However, we believe another scenario is more likely. The rise since 2009 happened from the median of this long term rising channel. It certainly does not compare with the rise between 1982 and 2000 (bottom to top of the channel). So the last 10 years saw a strong, but nowhere near an extreme rise. The thesis of this 2nd scenario is that the Dow Jones Industrials Index will continue to trade in its upper channel. This will deliver moderate but continuous gains in the next few years.
We continue to look to the currency and bond market for pointers whether we are in scenario 1 or scenario 2.
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