110 Years Of The Dow Jones Industrial Average: Volatility Is Normal

Doug Short put up a great chart over the weekend by Peter Williams from ATradersRant. Long-term charts like this help to show where we’ve been. Otherwise, how can you try and figure out where we’re going? Historical charts show us how important Secular Bear markets are in the big picture. It’s normal for bull markets to correct. Nothing goes straight up. Over a century’s worth of data shows us that these corrections, which often take a couple of decades to complete, eventually become historic buying opportunities.

(Click Chart to Embiggen)

From Peter Williams via dshort:

What struck me first from the DJIA historical chart above was how many periods of sideways range bound movement had the same volatility (see note below). It showed the 2007-2009 peak to trough was the same in each instance of 1915, 1940, 1975. The real kicker was discovering the trough of 1932 to peaks in 1966 and 1973 lead to repeating ranges in 2008, and ‘possibly’ higher into 2015. The first range of 33.5 years was near enough to exactly repeat itself (hit the value, but peaked slightly early). The second range of 40.5 years is looking promising to date with an upside target of 14090 on/before May 2015.

However, these peaks previously occurred during a 16 year period of range bound equity performance (in nominal terms). As is plainly evident, there are a multitude of prevailing global conditions that indicate no immediate end to the present turmoil, and the DOW history above suggests a possible sideways churn extending out to Dec2015. So even if the second range eventuates to complete at 14090, there is a period of downside risk remaining based on historical precedence. Also note the containment box does not necessarily imply a lower bound.


110 Years of Dow History Reveals a Little Secret: Volatility is Normal (dshort)

Tags: $DJIA $DIA