In One ChartThe Dow is running hot. History says that’s usually a good sign.Buying pressure across time frames ‘is truly historic’: SentimenTrader
By
William Watts
Follow
Published: Oct. 9, 2024 at 3:18?p.m. ET
 The Dow is showing impressive momentum across time frames.Photo: MarketWatch photo illustration/iStockphoto
No matter the time frame, the Dow Jones Industrial Average is running hot — and that momentum may bode well, at least over the coming months, according to a widely followed research firm.
The Dow DJIA has risen 152 times over the past 250 trading days, Jason Goepfert, senior research analyst at SentmenTrader, observed in a Wednesday note — a win rate of just under 61%. The only times it saw such consistency in the past came in April 2010 and May 2018, and both those instances preceded periods of around six months of choppy trading, he wrote.
The momentum, however, is more than a short-term phenomenon. Zooming out on the time frames, the blue-chip index has also risen in a little more than 60% of weeks over the past 100 weeks, he said, a reading that isn’t terribly extreme relative to the last 40 years but that represents continued improvement after a “miserable stretch” in 2022.
It’s also risen in 63% of the past 60 months, which also isn’t the most extreme but is toward the high end over the past 124 years, the analyst said. And it’s up in 80% of the past 15 years.
Put it all together and the Dow is showing “impressive and persistent momentum on daily, weekly, monthly, and yearly time frames,” Goepfert wrote.
“Because the momentum isn’t isolated to a time frame or two, the current level is historically extreme, ranking in the top 6% of all readings since 1900. If we exclude the 1995-2000 bubble, the current reading would rank in the top 2% all-time,” he said.
Goepfert noted that periods of extreme upside momentum have signaled exhaustion in the past for some sectors, such as utilities, but not for the Dow industrials. As shown by the chart below, at other times when the average of up periods across time frames topped 66%, losses were rare, with the Dow seeing particularly strong returns over the following nine-month periods.
 Illustration: SentimenTrader
Here’s another way to slice it: Goepfert observed that the Dow has risen at least 60% of the time across all four time periods — daily, weekly, monthly and yearly. That’s also exceptionally rare, he found, happening only six times. But the returns following the signal weren’t as pristine, largely due to the global financial crisis in 2018, he said. The period after the last signal in April 2018 also saw mediocre returns.
What happens if you put the two studies together? There have only been two instances when the Dow rose at least 60% of the time across all four time frames and when its average percentage of rising periods was 66% or higher, according to Goepfert.
When both signals were triggered in 1959, the Dow continued to rise for several months but then entered a period of wide swings, making no progress either way until beginning a new sustained trend in 1963, Goepfert found. It was a similar story in 2017-18, with the index extending its rise for a few months before falling into a years-long funk that was exited only after the pandemic surge.
Become a more knowledgeable investor today
Unlock this special offer to make the most of your money with personalized financial insight from MarketWatch + Barron's.
Subscribe Now: 63¢ per Week
So what are investors to make of it all?
“The buying pressure the index has enjoyed across time frames is truly historic. And, for the most part, this has been a good sign, at least for another 6-9 months. After that, the precedents dwindle further, especially those that show sustained gains,” Goepfert said. “The 1995-2000 period is the only one that managed a prolonged, impressive continuation of the momentum, and bulls need to hope that the [artificial intelligence] revolution is comparable to the internet bubble.”
About the Author
William Watts
Follow
William Watts is MarketWatch markets editor. In addition to managing markets coverage, he writes about stocks, bonds, currencies and commodities, including oil. He also writes about global macro issues and trading strategies. During his time at MarketWatch, Watts has served in key roles in the Frankfurt, London, New York and Washington, D.C., newsrooms.
Partner Center
Show Conversation (5)
Advertisement
Advertisement
Back To Top
Copyright © 2024 MarketWatch, Inc. All rights reserved.
Terms of Use UPDATED Privacy Notice Cookie Notice
Intraday Data provided by FACTSET and subject to terms of use. Historical and current end-of-day data provided by FACTSET. All quotes are in local exchange time. Real-time last sale data for U.S. stock quotes reflect trades reported through Nasdaq only. Intraday data delayed at least 15 minutes or per exchange requirements. |
