Dow Jones Ripe for a Short-Term Pullback Before Resuming Long-Term Uptrend

 | Dec 20, 2023 01:49AM ET

  • The Dow closed higher for the 8th consecutive day to hit a record high, an event that we’ve only seen 42 times in the index’s 127-year history.
  • Historical returns following past 8-day winning streaks to record highs have been above average over the next 1-3 months, but more mixed over the next year.
  • The DJIA is overbought and could see a short-term pullback toward 37K or 36K before resuming its longer-term uptrend.
    • h2 DJIA Historical Analysis/h2

    Many analysts prefer to look at the broader S&P 500 or the more “modern” Nasdaq 100 as a better gauge of US stock market performance than the stodgy old Dow Jones Industrial Average, but there’s one advantage to the DJIA that no one can deny: Its LONG history.

    The DJIA was first created in 1896 by, you guessed it, Charles Dow and originally consisted of 12 industrial giants. While the index has expanded and the companies within it have changed, the DJIA is still by far the US stock market index with the longest history, making it fertile ground for historical analysis.

    Specifically, yesterday marked a relatively rare bullish signal: The Dow closed higher for its 8th consecutive day, hitting a record high in the process. Going back through the 127-year history of the DJIA, this has only happened 42 previous times, or about once every 3 years (though they tend to cluster – we once went 26 years without such a signal from 1929 to 1955!):