Category Archives: Dow Jones Transportation Average

Market Return After Exceptional Year – 2023

Posted on January 28, 2024 by nlo-admin | 2 comments

It’s no secret that 2023 was an exceptional year to be long the market. S&P 500 gained 23.8% while the Dow Jones Industrial Average rose 13.7%. In this review, we review the historical return of the subsequent year after a strong market uptrend. This frame work provide an objective view for market performance from historical pattern. For more on this work, review or original post here. Continue reading →

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Posted in DJIA, Dow Jones Transportation Average, S&P 500

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Dow Theory: Technical Take

Posted on June 3, 2023 by nlo-admin | 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 Jones Transportation Average Review

Posted on January 17, 2023 by nlo-admin | Leave a comment

Below is the review of the Dow Jones Transportation Average from 1970-2023. Continue reading →

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Posted in DJT, Dow Jones Transportation Average, Dow Transports

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Dow Jones Transportation Average: On Target

Posted on May 24, 2021 by nlo-admin | 1 comment

Review

On December 23, 2018 when the Dow Jones Transportation Average (DJTA) was at 8,874.79, based on the work of Edson Gould, we said the following in our closing paragraph:

“We have a range from as low as 6,465.65 to as high as 19,992.65 in period from 2019 to 2023. The Dow Jones Transportation Average is currently undervalued. It is best to expect that it will decline to the extreme level of 6,465.65.”

Since late 2018, the DJTA has had the following price activity:

On March 18, 2020, the DJTA declined as low as 6,481.20, falling short of our 2018 estimated low by 0.24%.

Because the DJTA is slightly above our fair value estimate for 2021 (made in 2018), we expect that even if the Index does not achieve the overvalued level in the current year, the historical precedent is for it to be able to achieve the upper range (overvalued level) that we’ve set for it between now and 2023.

DJTA 10-year price targets

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Posted in Altimeter, Dow Jones Transportation Average, Dow Transports, Edson Gould

Golden Cross Analysis: Transports & Russell 2000

Posted on August 12, 2020 by nlo-admin | Leave a comment

As the market continues to move higher, there will be more companies and indexes reaching the Golden Cross technical pattern. This is evident by the recent article, Dow transports and Russell 2000 see ‘golden cross’ materializing, which suggests that this pattern is bullish for the two indexes. Our recent article on this technical indicator shed light on how successful this pattern is when it’s applied to the Dow Jones Industrial Average.

The tool we developed allows us to quickly analyze the pattern against various indexes. Let’s see how successful the Dow Jones Transportation Average and Russell 2000 are with technical pattern known as the Golden Cross. Continue reading →

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Posted in Death Cross, Dow Jones Transportation Average, Dow Transports, Golden Cross, Russell 2000

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Dow Theory: March 1, 2020

Posted on March 1, 2020 by NLO Team | 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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The Dow and Spanish Flu of 1918-1920

Posted on February 25, 2020 by NLO Team | Leave a comment

Conventional wisdom suggests that a flu pandemic like COVID-19 would have resulted in a further decline in financial markets rather than a reversal of a long established declining trend. That was not the case for the period from 1918 to 1920.

In the last worst case of a flu pandemic, known as the Spanish Flu from 1918 to 1920, we compare the movement of the Dow Jones Industrial Average (DJIA) to the Dow Jones Transportation Average (DJTA).

In the period when it was on the ascent (late 1917), the Spanish Flu had seen the Dow Jones Industrial Average come off of a decline of -40.09%. From the December 19, 1917 low, the Dow Jones Industrial Average increased approximately +81.37% by November 3, 1919.

The peak in the Spanish Flu occurred approximately November 1919. This was in the midst of the Dow Jones Industrial Average’s run from the low in December 1917 to the 1919 peak. After the 1919 peak in the Dow Jones Industrial Average, the market declined -46.57% to the August 25, 1921 low. The low in 1921 was the beginning of the monumental runs in the stock market with a market peak in 1929.

How many declines of -3% did the Dow Jones Industrial Average experience in the period from December 16, 1915 to December 16, 1921?

What conclusions can be drawn from the above data? In the period from 1918 to 1920, the Dow Jones Industrial Average experienced 6 declines greater than -3% on the way to the peak in November 1919. After the peak of November 1919, there were a total of 10 declines greater than -3% on the way to the August 1921 low.

Below we have broken the declines into a quarterly basis in the period from December 1915 to December 1921.

With half of the declines of greater than -3% occurring in the fourth quarter of the year, we should expect that there is going to be more large declines to come.

The Dow and Bear Market Duration

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Posted in 1915, 1918, 1920, 1921, COVID-19, DJIA, Dow Jones Transportation Average, Flu

Market Return After Exceptional Years

Posted on February 9, 2020 by nlo-admin | Leave a comment

2019 was an exceptional year to be long equities. The S&P 500 gained +30.40% which is the 6th time the market put up gain of +30% or more. This peaked our interest in subsequent market returns after an exceptional year. We compiled and analyzed the data for our readers.

Below is the market return after the S&P 500 gained +30% or more. The average return in the subsequent year was +20% with 100% success rate.

Index	Year	% Change	Subsequent Year % Change
S&P 500	1954	44%	24%
S&P 500	1958	37%	8%
S&P 500	1975	31%	19%
S&P 500	1995	34%	20%
S&P 500	1997	31%	27%
S&P 500	2019	30%	?

Reducing the market return for the S&P 500 to +25%, the success rate dropped to 83.30% and the only 2 subsequent down years were 1981 and 1990. The average return under this assumption is +12%.

Index	Year	% Change	Subsequent Year % Change
S&P 500	1954	44.2%	23.8%
S&P 500	1958	36.9%	8.0%
S&P 500	1975	31.4%	19.1%
S&P 500	1980	25.8%	-9.7%
S&P 500	1985	26.4%	14.6%
S&P 500	1989	27.3%	-6.6%
S&P 500	1991	26.3%	4.5%
S&P 500	1995	34.1%	20.3%
S&P 500	1997	31.0%	26.7%
S&P 500	1998	26.7%	19.5%
S&P 500	2003	26.4%	9.0%
S&P 500	2013	29.6%	11.5%
S&P 500	2019	30.4%	?

Taking this return down to +20% didn’t change the success rate of having a positive return in the subsequent year. The success rate remain at 83.30% but the average return dropped slightly to +11%.

Index	Year	% Change	Subsequent Year % Change
S&P 500	1950	22.6%	14.4%
S&P 500	1954	44.2%	23.8%
S&P 500	1955	23.8%	3.3%
S&P 500	1958	36.9%	8.0%
S&P 500	1961	24.3%	-11.8%
S&P 500	1967	20.1%	7.7%
S&P 500	1975	31.4%	19.1%
S&P 500	1980	25.8%	-9.7%
S&P 500	1985	26.4%	14.6%
S&P 500	1989	27.3%	-6.6%
S&P 500	1991	26.3%	4.5%
S&P 500	1995	34.1%	20.3%
S&P 500	1996	20.3%	31.0%
S&P 500	1997	31.0%	26.7%
S&P 500	1998	26.7%	19.5%
S&P 500	2003	26.4%	9.0%
S&P 500	2009	23.5%	12.6%
S&P 500	2013	29.6%	11.5%
S&P 500	2019	30.4%	?

The last table shows subsequent return when the market rises +15% or more. Under this circumstances, the market rose 70.80% of the time with an average return of +6.90%.

Index	Year	% Change	Subsequent Year % Change
S&P 500	1950	22.6%	14.4%
S&P 500	1954	44.2%	23.8%
S&P 500	1955	23.8%	3.3%
S&P 500	1958	36.9%	8.0%
S&P 500	1961	24.3%	-11.8%
S&P 500	1963	18.9%	13.0%
S&P 500	1967	20.1%	7.7%
S&P 500	1972	15.6%	-17.4%
S&P 500	1975	31.4%	19.1%
S&P 500	1976	19.1%	-11.5%
S&P 500	1980	25.8%	-9.7%
S&P 500	1983	17.3%	1.4%
S&P 500	1985	26.4%	14.6%
S&P 500	1989	27.3%	-6.6%
S&P 500	1991	26.3%	4.5%
S&P 500	1995	34.1%	20.3%
S&P 500	1996	20.3%	31.0%
S&P 500	1997	31.0%	26.7%
S&P 500	1998	26.7%	19.5%
S&P 500	1999	19.5%	-10.1%
S&P 500	2003	26.4%	9.0%
S&P 500	2009	23.5%	12.6%
S&P 500	2013	29.6%	11.5%
S&P 500	2017	18.7%	-6.6%
S&P 500	2019	30.4%	?

Updated 1/28/2024 - Market Return After Exceptional Year – 2023

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Posted in Dow Jones Transportation Average, S&P 500

Rates Up, Stocks Down? Nope!

Posted on February 10, 2019 by nlo-admin | 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.

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.

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