Category Archives: Dow Industrials

Buybacks, Maybe?

Posted on January 1, 2024 by | 1 comment

Q: “Maybe low yield out performs because instead of dividends they are doing buybacks?”

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Posted in buyback, CRM, Dow Industrials, WAG, WBA

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Dow Theory: Technical Take

Posted on June 3, 2023 by | 2 comments

We outline the current market conditions based on the technical attributes applying the work of Charles H. Dow.

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Posted in Dow Industrials, Dow Jones Transportation Average, Dow Theory, Dow Theory Non confirmation, Russell 2000

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Dow: Spanish Flu vs. Covid-19

Posted on March 1, 2023 by | 3 comments

A comparison between the Dow Jones Industrial Average during the Spanish Flu Pandemic and the Covid-19 Pandemic. Continue reading →

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Posted in COVID-19, Dow Industrials, Flu

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Dow and S&P 500 Comparable Levels $SPX

Posted on October 10, 2022 by | Leave a comment

This is an update to a comparison we did showing how alike the the two indexes, Dow Jones Industrial Average and S&P 500, are: Continue reading →

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Posted in DJIA, Dow Industrials, S&P 500

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Market Rewind: S&P 3,384/Dow 3,384

Posted on September 15, 2020 by | Leave a comment

On September 14, 2020, the S&P 500 Index closed at 3,383.54.  To celebrate, we are going to review what Richard Russell’s Dow Theory Letters had to say about the market when the Dow Jones Industrial Average closed at 3,384.32 on August 4, 1992.

Russell said:

"...the nation's in a 'contained depression'."

"Interest rates have collapsed, consumers are gloomy, and nobody's taking out loans.  That's exactly what happened during the Great Depression--with one big difference.  Then the stock markets were crashing but today the markets are bullish. So how are the two periods different? As I interpret it, today's stock market is saying that somewhere ahead business is going to pick up and people will start buying again---unlike during the 1930s."

"for the first time since the Great Depression almost all the nations in the northern hemisphere are in various stages of a recession."

"...the widely publicized figure is that 40% of the 5,000 listed stocks have been downed by 30% or more.  On that basis, some analysts are referring to 1992 as the 'year of the hidden bear market'..."

That was page one of six from the August 5, 1992 issue of Dow Theory Letters. Fascinating? History doesn’t need to repeat.  However, good analysis starts with precedents first, as outlined by Charles H. Dow, and diverges afterward, not the other way around.

What was being said by other analysts is not too different from what we’re hearing today. We all know what has happened to the Dow since August 4, 1992.

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Posted in DJIA in Review, Dow Industrials, Richard Russell Review, S&P 500

Implications of the Dow Doubling Rate

Posted on August 23, 2020 by | Leave a comment

On August 21, 2020, we outlined the Dow Doubling Rate from 1900-2020.  The data highlights a fundamental issue about how the doubling rate works. Continue reading →

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Posted in Doubling Rate, Dow Industrials

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Dow Doubling Rate:1900-2020

Posted on August 21, 2020 by | Leave a comment

In a August 18, 2020 MarketWatch.com article written by Brett Arends titled “Uh-oh: Investors predict ‘Dow 50,000’ — in just five years”, it states:

“…a sample of 1,500 people here in the U.S. who manage their portfolios, the average person expected the stock market to generate sky-high returns of 15.4% a year over the next five years.

“After accounting for dividends, that would mean stock prices would nearly double by 2025…”

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The conclusion of the article:

“It is, ominously, generally near market peaks when investors are most bullish. Whether we’ll have a crash or a bear market is another matter.

“Yes, 15% could technically happen. But I wouldn’t bet on it.”

One element that is missing is the actual doubling rate data of the Dow Jones Industrial Average.  Below is Doubling Rate of the Dow starting when the Dow Jones Industrial Average was at 55 on July 2, 1900 until 2020.

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The actual doubling rate data suggests that the conclusions arrived by Mr. Arends are incorrect.

Our next article on this topic will break down the key elements to understand about the data presented which will make it clear that, doubling from the current level might be a modest proposal.

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Posted in Charles H. Dow, Doubling Rate, Dow Industrials

1899-2020: Dow Industrials and Transports

Posted on August 20, 2020 by | Leave a comment

Bear Markets for the Dow Jones Industrial & Transportation Averages from their peaks to their ultimate lows.

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see also:

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Posted in 1899, bear market, Cyclical Bear Market, Dow Industrials, Dow Transports

Consumer Sentiment: June 12, 2020

Posted on June 12, 2020 by | Leave a comment

With today’s announcement from the University of Michigan’s Consumer Sentiment Survey we have updated our June 11, 2020 posting and contrasted it with the Dow Jones Industrial Average from 2007 to 2020.

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The recent reversal in the survey is reflecting what we saw in the low of the Dow Jones Industrial Average which occurred on March 23, 2020.  This implies that the stock market (subject to zero revisions) leads the sentiment survey by more than 60 days.  Whether this reversal is the low will be determined in due time.

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Posted in Consumer Sentiment, Dow Industrials

DJIA Yield Profile: March 12, 2020

Posted on March 12, 2020 by | Leave a comment

This bear market has taken everything in its path down. Unless you are shorting the market, there is nowhere to hide. Perhaps the most scary thing is that this downturn is probably far from over.

The rate of change for new cases for COVID-19 continue to rise and even accelerate. Until we see a deceleration in the total cases for the US, the market will continue to fall.

The first chart comes from worldometers.info which we believe has better data than WHO (data from WHO shows 0 new cases over the past weekend).

COVID19_ActiveCase_03.12.2020

Despite the bad news, we are persistent in keeping our focus on long-term investment opportunities. If and when this is behind us, there will be tremendous opportunity to purchase blue-chip companies that will provide you with higher than average income. Take the Dow Jones Industrial as example.

Based on the close of March 12, 2020, the dividend yield reached 3%. Contrast that with 10-year T-Bill which fell below 1%. The risk-premium on the Dow (based on yield) spike to 2%.

This is not an indication that a bottom is here or even near. However, from an investment perspective, investing $10,000 today in the Dow seems like a better bet than a bond that will mature in 2030.

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This too shall pass and we can't wait until then. Please take care of yourself and those around you.

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Posted in dividends, DJIA, Dow Industrials

Dow Theory: March 1, 2020

Posted on March 1, 2020 by | Leave a comment

In our last Dow Theory assessment on October 4, 2019, we said the following:

“…[the] two indexes [DJIA & DJTA] as exhibiting bearish reversal patterns from the prior trend.  The bear market continues until the dashed red and blue lines are exceeded to the upside.”

It didn’t feel like it but we were in a bear market at least since October 2019.  How do we know?  While the Dow Jones Industrial Average (DJIA) was moving to new highs, the Dow Jones Transportation Average was unable to exceed the prior peak set at 11,570.84 on September 14, 2018.

Below are the downside targets for the DJIA & DJTA based on Dow’s Theory. Continue reading →

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Posted in Dow Industrials, Dow Jones Transportation Average, Dow Theory

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Consumer Sentiment: August 2019

Posted on August 4, 2019 by | Leave a comment

Review

On April 1, 2019, we wrote an extensive piece on the work Charles H. Dow and how the Dow Jones Industrial Average is a consumer sentiment indicator that precedes the widely quoted University of Michigan Consumer Sentiment Survey.

When we say that the Dow Jones Industrial Average precedes the University of Michigan Consumer Sentiment Survey, an appropriate response should be that, when compared to the actual data, the University of Michigan Consumer Sentiment Survey generally peaks and troughs before the Dow Jones Industrial Average.  As this is an accurate claim, we are required to point out that University of Michigan Consumer Sentiment Survey is delayed and revised every two weeks whereas the Dow Jones Industrial Average is instantaneous and unrevised.

Is a two week delay all that important in the big scheme of things?  It is likely that the Dow Jones Industrial Average influences the outcome of the University of Michigan Consumer Sentiment Survey.  As a reminder, the Consumer Sentiment Survey is a phone survey consisting of 50 questions across 500 or more individuals/households versus the stock market that reflects millions of transactions on a daily basis.

Current Take

In the chart of the Year-Over-Year comparison of the University of Michigan Consumer Sentiment Survey and the Dow Jones Industrial Average, we have included the current cycle from the recession of 2007-2009 to the present.

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In the chart above, the current view is best reflected in the late-2017/early-2018 declining trend.  We’ve highlighted, in a green circle, the Dow Jones Industrial Average as it reverses a rising trend and then starts to decline.  Likewise, the Consumer Sentiment Survey starts to flatten rather than continue to move higher.

Forward View

A trend doesn’t define the future prospects.  However, we believe that the declining trend has not completely played out.  This means that we expect that the economy and stock market will languish, in the best case scenario.

Alternatively, if the Dow Jones Industrial Average can exceed the 28,750 level, the Consumer Sentiment Survey will reflect this change of direction and move above the short-term peak of May 2019. 

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Posted in Consumer Sentiment, Dow Industrials, Dow's Economic Indicator

Rates Up, Stocks Down? Nope!

Posted on February 10, 2019 by | Leave a comment

There is a contingent of analysts and economists who stand in the way of progress in economic and financial understanding of how stock markets work.  One prevailing view is that the rise of interest rates is followed by a decline in the stock market.  Worse still, there is the belief that reducing interest rates is the Federal Reserve’s primary tool for dealing with slowing economic growth.

Below, we show how, in spite of a cyclical increase of the Federal Reserve’s discount rate, from early 1925 to mid-1929, the stock market defied modern analysts and economists claims.

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In the period from 1925 to 1929, the Federal Reserve embarked in a policy of increasing the discount rate.  Below is the performance of the Dow Jones Industrial Average and Dow Jones Transportation Average in the period from 1925 to 1929.

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As we all know, the period that followed the peak in stock market in 1929 was declining interest rates and a subsequent stock market decline of nearly –90%. 

Were we biased in our selection of the data?  Absolutely!  We chose the cyclical (short-term) period for one of the most notorious stock market rises and declines and added the cyclical period of rising interest rates to prove a point. 

However, if you want to see how the stock market did during a secular (long-term) period of rising interest rates then see our posting titled “The False Narrative of Stocks and Interest Rates” published on January 7, 2019.

sources:

  • A.C. Miller. “Responsibility for Federal Reserve Policies: 1927-1929”. The American Economic Review. September 1935. pages 442-458. accessed 2/10/2019. JSTOR

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Posted in 1929, Dow Industrials, Dow Jones Transportation Average, false narrative, interest rates

Interest Rates and the Dow

Posted on October 7, 2018 by | Leave a comment

The secular trend for interest rates is clearly up after declining since April 1981.

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There are “experts” on the topic of interest rates and the stock market claiming that the Federal Reserve policy of “artificially low” interest rates is the reason the stock market is up since the low of 2009 and as a supplemental proof of their lack of knowledge, the “experts” include the Dow increase from the 2001-2003 lows as the devil’s handiwork.  These same “experts” also claim that the stock market will crash if rates start to go up.

Yes, stocks can go down as a function of rising rates.  However, this needs to be put in context of the overall market.  As we start to emerge from a secular declining trend, from 1981 to 2008, to a secular rising trend, from 2008 to 2035,  the only comparisons of the current rising trend can only be done to the last secular rising trend from 1942 to 1981.

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The “experts” claim this time is nothing like the postwar economy that led to the rate peak in 1981.  We’ll have to wait and see, for now the following data stands in opposition of the “experts.” Continue reading →

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Posted in 3-month, Dow Industrials, Dow Jones Utility Average, Federal Reserve Bank, Interest Rate Monitor, interest rates

Crypto Myth and Market Reality

Posted on February 6, 2018 by | Leave a comment

The Myth

The prevailing theory is that the cause of the decline in cryptocurrencies lately is that the “banks” and Wall Street want to undermine the market for decentralized currencies to either steal the technology like the record industry and Apple (AAPL) did with Napster, or to eliminate a viable competitor to the Wall Street and banking industry cabal.

The Reality

The reality is that, like the introduction of every new technology that turned out to be revolutionary and widely dispersed to the point that it became second nature in its use and profound in it’s application, the price/value of such technologies is only relevant to the use.

In the formative stages (right now), blockchain technology is trying to find its footing in the world.  Make no mistake that blockchain is here to stay and it will likely permeate everyone’s lives, like it or not.  However, as with the canal, railroad, airplane, automobile, computer, biotechnology, and internet bubbles before, there will be thousands of contenders but only a dozen survivors (at most).  The risk of loss is significant when there are more than a thousand different cryptos out there and we all know there should be two dozen, at best.

The Market Reality

Everyone loves a great conspiracy theory.  However,  The last week of market volatility is proof that when everyone wants to sell, it doesn’t matter what they are holding.  Take for example the Dow Jones Industrial Average (DJIA) and Bitcoin (BTC).  The chart below shows the hourly percentage change in BTC  (cryptocurrency) versus the DJIA (Wall Street/bankers) from January 30, 2018 to February 5, 2018.

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In the last week, it should be more difficult for someone to make the claim that Wall Street is pushing down cryptocurrencies while at the same time, Wall Street is falling as well. 

Our take on the matter is actually quite the opposite of the conspiracy theory, if Wall Street can continue to rise, there will be more money and enthusiasm to fund hair-brained ideas within the crypto space.  However, when the money drains out of Wall Street, it will also drain out of all the cool ventures that support and ensure the organic growth of the crypto environment and at a ridiculous rate.

The question might come up as to why BTC is crashing more than the DJIA if everyone is selling in all markets.  In a nutshell, familiarity.  The DJIA has been around for more than 120 years.  BTC has been around for less than 10 years.  Anyone unfamiliar with the risks of a new venture is naturally going to be more skittish when the old line investment (DJIA) is crashing, on a relative basis, and therefore would put into question the more dubious blockchain ventures, this in spite of blockchain technology possibly becoming bigger than the concept of money as we know it.

In Closing

As indicated above, cryptocurrency investors should embrace the idea that a rising stock market allows more money to go into more wasteful, and potentially lucrative, ventures in the blockchain universe than a falling stock market.  Just for the sake of better understanding the point we’re trying to make, get a copy of the book F’d Companies: Spectacular Dot-com Flameouts by Philip J. Kaplan.  You’d be surprised to know that even though there are some ridiculous concepts for dot-com companies, there are still many that would be incredibly lucrative today if the stock market didn’t crash like it did from 2000-2003.

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Posted in Bitcoin, book, Dow Industrials