The Dow's Below-Average Run To A Record High

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 |  Includes: DIA
by: David I. Templeton, CFA

Earlier this week, the Chart of the Day charting service provided information on Dow rallies over the past 114 years. As the below chart shows, the current advance in the Dow lags the average Dow rallies in terms of magnitude and duration. The commentary included with the Chart of the Day graph is as follows.

The Dow just made another all-time record high. To provide some further perspective to the current Dow rally, all major market rallies of the last 114 years are plotted on today's chart. Each dot represents a major stock market rally as measured by the Dow with the majority of rallies referred to by a label which states the year in which the rally began. For today's chart, a rally is being defined as an advance that follows a 30% decline (i.e. a major bear market). As today's chart illustrates, the Dow has begun a major rally 13 times over the past 114 years which equates to an average of one rally every 8.8 years. It is also interesting to note that the duration and magnitude of each rally correlated fairly well with the linear regression line (gray upward sloping line). As it stands right now, the current Dow rally that began in March 2009 (blue dot labeled you are here) would be classified as well below average in both duration and magnitude. However, the magnitude and duration of the current post-financial crisis rally has now reached median status -- its magnitude and duration is greater than six and less than six Dow rallies since 1900.

From The Blog of HORAN Capital Advisors
Click to enlarge


Source: Chart of the Day