(Photo by Spencer Platt)
Since the 2016 presidential election the Dow Jones Industrial Average began to climb above 1,000-point milestone levels beginning with Dow 18,000.
Each time a new milestone was reached the traders on the floor of the New York Stock Exchange passed out baseball hats with the milestone on the hat. Since Dow 18,000 there have been 11 additional hats passed around—up to Dow 29,000, which was crossed as 2020 began.
Since then, the Dow slipped below each of these 11 hats between February 21 and March 23. That’s a lot of lost caps within one month.
The rebound from this low stalled just above the Dow 22,000 hat. I will call this my “Dow Hat Indicator.”
Friday’s close for the Dow was 21,052 so the current reading for the Dow Hat Indicator is 27%. (3 divided by 11).
In effect, my indicator weighs each 1,000-point move equally. As the Dow rose from 18,000 to 29,000 each 1,000-point rise was a smaller percent gain.
Here’s my monthly chart for the Dow
Monthly Chart For The Dow
Courtesy of Refinitiv Xenith
Look at the scale on the right in the chart. Each level matches the Dow Hats that were given out during the bull market gains since November 2016. The Dow cascaded below all 11 hat levels between February 21 and March 23. The rebound off the low stalled above the 22,000-hat.
The 120-month simple moving average is shown in green. The vertical lines are each month going back to the beginning of the 21st Century. The comments show my market-timing calls since the year 2000.
Many on Wall Street predict a re-test of the March 23 low. For this week I have a value level for the Dow at 18,846, which is a big drop but above the 120-month SMA at 18,117.
What happens if this moving average fails to hold? The downside is to the October 2007 high of 14,198.
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