On Oct. 31 last year, the Dow Jones Industrial Average (DJIA) closed at 25,116. On Jan. 31, the DJIA closed at 25,000. If you didn’t know better, you’d think it was a boring few months.
But in reality, the DJIA experienced some eye-popping volatility over that time period — moving lower in November through Christmas eve by more than 13% before rallying by almost 15% in the past five weeks to end the three months almost unchanged.
With the markets rallying strongly, is now the best time to get back in? Let’s look at some of the best months in history. We have data for the DJIA going back to 1928, so we’ll use that as our example.
Below you’ll see the best 15 months of reviewable history of the DJIA ranked from biggest change to smallest. Almost all of these were during the Depression era. Look at the huge volatility; there were extraordinary gains and extraordinary losses.
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And, in the chart below, you’ll see the results if we change our approach to use a starting point of 1980. Almost all of these would have proven to be very good times to get back into the market.
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After the astounding 1,000 point rebound the day after Christmas last year, the DJIA was up more than 7% for the month of January. Yet, despite the rebound, the DJIA remains in the Stock State Indicator (SSI) Red Zone.
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And it could remain in the SSI Red Zone for another couple of months, even if it continues to rise.
For comparison, let’s look at the last bear market that ended in 2009. After the bottom of the market was made in 2009, it took more than six months for the DJIA to rebound strongly enough to trigger a new SSI Entry signal.
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Of course, the current market hasn’t dropped 50% as the market did in 2007–2009. It shouldn’t take six months for a new SSI Entry signal to trigger if the DJIA continues to rise.
Nobody knows if this is a good time to get back into the market. There are experts who have bullish opinions, and there are experts who have bearish opinions.
In fact, on Feb. 13, TradeSmith will be hosting five such experts — some bullish and some bearish — to talk about where they see the markets moving in 2019. It’s called the Bull vs. Bear Summit of 2019, and you can register now to listen in for free to hear what the bulls and the bears have to say about what’s coming in 2019.
But regardless of where the market goes, that’s the reason we rely on signals. Remember that the goal of the TradeStops system is to give you the best opportunity to enter a position that has the potential to move higher according to our proprietary algorithms. Despite the markets’ meteoric rise in January, all the major indexes are still in the SSI Red Zone.
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In lieu of our normal Wednesday training webinar, I encourage you to join TradeSmith and our expert panelists for the Bull vs. Bear Summit 2019. You’ll hear from:
- Whitney Tilson, former hedge fund manager and author, regular guest on CNBC, Bloomberg, and Fox Business News.
- Steve Sjuggerud,former hedge fund manager, financial Ph.D., and editor of the monthly advisory, True Wealth.
- Dan Ferris, editor of Extreme Value, featured in Barron’s, the Value Investing Letter
- Alexander Green, author and Chief Investment Officer at The Oxford Club, and
- Glenn Tongue, founder of Deerhaven Capital Management
They’ll discuss where they see the market going in 2019 and how you can capitalize, regardless of what happens next. It’s going to be a really exciting and informative event that you won’t want to miss!
Cheers,
Tom Meyer
Research and Education Specialist
