Real Dow (Inflation Adjusted DJIA)
The black line in the chart represents the Real Dow. The Real Dow is the DJIA,
adjusted for inflation. If you look at the nominal DJIA (gray), you will see that from
1966 through 1983 the Dow moved sideways for 18 years... a difficult period for
investors. But that's not the whole story. Inflation raged through much of that period...
reaching an annual rate of over 14% at some times. So, while investors broke even in
the nominal value of the Dow, their dollars were losing purchasing power.
If the stock market gains 4% next year, and inflation is 14%, the stock market will
actually lose 10% in purchasing power. The black line shows the value of the DJIA in
real (inflation adjusted) dollars. Notice that the Real Dow didn't break 1000 until 1997!
Secular Trend Indicator (Dow Jones Industrial Average)
ForecastChart.com's Secular Trend Index is shown in green and red. Green is bullish.
Red is bearish. A Secular Trend is a trend that lasts over five years. The longest
Secular Trend in the Dow during the previous century was the Secular Bull Market of
1933 - 1966, 33 years. The Real Dow experienced a seventeen year Secular Bear
Market from 1966 through 1983. The 1983 - 2000 Bull market was a seventeen year
Secular Bull Market.
ForecastChart.com's Secular Trend Indicator is designed to focus on the root cause
of stock market strength and economic health. The Indicator is currently
Bearish. It is a very Long Term Indicator. If correct, the stock market and the
economy will struggle for many years from the date that it turned Bearish.
A bearish Secular Trend Indicator doesn't suggest that the market will not experience
powerful up markets. It does suggest that up trends lasting two or three years will
relinquish those gains in the years that follow. The period 1966 -1983 in the above
chart is an example of just such a period. In that period, the market moved up and
down. But the down movements were more powerful than the up markets. In such
times, crises will be followed by recovery. Recovery will be followed by crises.
During each crisis, the government will take many actions designed to improve the
situation. These measures typically include lowering interest rates, making it easier to
borrow money, reducing taxes, stimulus bills, and etc. These measures will most likely
provide relief from the symptoms of a diseased economy but not a cure.
ForecastChart.com's Secular Trend Indicator is designed to gauge the state of the
underlying cause of economic weakness. When the indicator turns Bullish, hopefully a
very long and powerful Bull Market will follow. The Bull Market of 1983 -2000 is one
ForecastChart.com's Secular Trend Indicator was designed to provide clues to the
future from the annals of history. The core of this timing system is a versatile model
that searches for major turning points in the stock market. Analytical equations were
crafted to provide an objective, unemotional LONG TERM stock market indicator. The
Secular Trend Indicator went live December 31, 2009 after being back-tested to
1960. The apparent correlation between the indicator and the stock market in the
chart above is evidence for the value of the indicator. However,
the objective investor must accept the very real possibility that the apparent
correlation may be the result of coincidence or a flaw of some sort. If the correlation
existed in the past, there is no way to know if the correlation will continue in the future.
To foretell the future is not within the grasp of mere mortals. This indicator is no
exception to that word of wisdom.
'60 1965 1970 1975 1980 1985 1990 1995 2000 2005 2010 2015 '20
|ForecastChart.com's Secular Trend Indicator (DJIA)
The monthly close of the Dow Jones Industrial Average (DJIA), from 1960 to present is
shown in gray. The DJIA in inflation adjusted dollars is in black. ForecastChart.com's
proprietary Secular Trend Indicator is in red and green. Updated 11/21/17.
|... ForecastChart.com's proprietary long term stock market indicator.