Dow Industrials - Yearly "Time At Mode" Analysis Update
Now that the DJIA is down on the year and down 1% today, I felt it was a good time to look a the parallels to the last breakout in 1976 from an "11 years at one price" level like we had in 2012. See what you think.
If we repeat what happened in the late 1970's with massive inflation (It averaged greater than 10% per year for 1976, 1977, 1978, 1979, 1980, 1981) then the stock market on a real basis will have a long way to go down. Most people don't look at the market that way, and consequently there can be many discussions about what really happened back then. The interesting point is that the stock market didn't reach a new high on this rally when adjusted for inflation (CPI-All Urban Consumers Index) from its peak in 2000 (see my chart published yesterday on the S&P500).
The 14 years mode for the 1915-1951 (386.10-40.56) trading range led to a similar-sized rally out of that range, which projected the high reached in 1972. The current trading range around the 11-years price range at 10,600 is 14198-6469, and allows for a move to 22,417 in the Dow Industrials. But remember this is a nominal price, not a "real" price.
Again, see what you think. If we go down and "retest" the mode at 10,600, that would be a very strong decline, yet historically it isn't out of line. On a long, long term basis, we could be breaking out of a level which will be the setup to another 9-fold move up in the market to 81,000 on the DJIA, since the first one is around 100, the next is at 900, so 9 times the 900 level gives us a target of 81,000.
I hope this chart is interesting. It is always good to look at the long term perspective.
Tim
If we repeat what happened in the late 1970's with massive inflation (It averaged greater than 10% per year for 1976, 1977, 1978, 1979, 1980, 1981) then the stock market on a real basis will have a long way to go down. Most people don't look at the market that way, and consequently there can be many discussions about what really happened back then. The interesting point is that the stock market didn't reach a new high on this rally when adjusted for inflation (CPI-All Urban Consumers Index) from its peak in 2000 (see my chart published yesterday on the S&P500).
The 14 years mode for the 1915-1951 (386.10-40.56) trading range led to a similar-sized rally out of that range, which projected the high reached in 1972. The current trading range around the 11-years price range at 10,600 is 14198-6469, and allows for a move to 22,417 in the Dow Industrials. But remember this is a nominal price, not a "real" price.
Again, see what you think. If we go down and "retest" the mode at 10,600, that would be a very strong decline, yet historically it isn't out of line. On a long, long term basis, we could be breaking out of a level which will be the setup to another 9-fold move up in the market to 81,000 on the DJIA, since the first one is around 100, the next is at 900, so 9 times the 900 level gives us a target of 81,000.
I hope this chart is interesting. It is always good to look at the long term perspective.
Tim
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