Dow Jones: Seasonality Targets Important Low Later This Month
Dr. Arnout ter Schure | Jun 16, 2021 04:44PM ET
Using data since 1900, one can construct “seasonal average” patterns for each four-year presidential election cycle. As 2021 is a post-election year and, despite all the FED’s “it is not quantitative easing” $100 billion per month, the Dow Jones Industrial Average has followed the average seasonal average pattern rather well. See Figure 1 below.
It makes me wonder what is driving markets? The Y-axis shows the average percentage change. But what matters more is the timing of the highs and lows.
Figure 1. Dow Jones Average Post-Election Year pattern and daily YTD chart
It follows that not all highs and lows exactly match in time. (See blue arrows.)
Still, the differences are minimal. And remember, we are talking about an average pattern of 20 elections, not about absolutes. Therefore, the bottom line is to expect a significant low some time next week before the next rally commences that takes the index to new all-time highs into early July.
After that high, we should – assuming the current market continues to follow the average pattern as it has and there is currently nothing to suggest it will not – expect a multi-month correction. Albeit, not shown here, but from an Elliott Wave Principle (EWP) perspective, I expect the pending low to be a smaller degree (intermediate) 4th wave; the rally into July the last 5th wave of a more significant (major) 3rd wave, and the correction into the fall should be major-4, with a major-5 to follow into 2022. That should then complete the bull market that started in March 2020.
Get The News You Want
Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.