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This DJIA chart signals a bad year for stock markets in 2016

If the US stock market is the most bullish of all in the whole world with its degree technological and financial innovation and *gasp* near unlimited powers of QE, then we know what 2016 is going to be like for rest of the world stock markets (hint: bearish).

Presenting 30 years of Dow Jones Industrial Average data painted in boxes according to 52-week highs and lows.

Light blue for years that expand bullishly new high and low over previous year and pink for years that expand bearishly into lower low and lower high. Note: 1988 and 2003 are ‘inside’ years coloured the same as their previous year as continuation.

 

DJIA monthly chart 1986 - present; each box defines   52-week highs and lows of 1 year

DJIA monthly chart 1986 – present; each box defines 52-week highs and lows of 1 year

 

Once the market does a bearish expansion below previous year low like the one on August 24 ‘Black Monday‘, unless it reverses to print a new high, any movement is considered a retracement of the previous wave. An example here.

 

Implications for investors, individuals:

  1. 2016 is likely a bad year since bad years come in 2s, 3s.
  2. Current rally is probably a retracement that professionals will be shorting into.
  3. Review, consider protection for your long term stock portfolio.
  4. Next year could be good year for traders since volatility actually offers additional trading opportunities.
  5. Since stock markets turning points often lead turning points in the economic cycle, there is high probability of recession coming.
  6. Whoever has a job this time next year should consider it a privilege.
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Director, TerraSeeds Market Technician Pte Ltd. Trader, investor. @sohtionghum was picked ‘Top 70 Forex Twitter in 2015’. Operates multiple strategies.

“Dear reader, I do not have a financial license to give advice. I do not know you the reader. Your financial objective and risk tolerance may be different from mine. I am not responsible for any consequence of your action.

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2 thoughts on “This DJIA chart signals a bad year for stock markets in 2016”

  1. H Y Wong says:

    Hi Mr Soh, I couldn’t find any products for stock investment protection in Singapore. Do you know any companies that offer protection for investments?

    1. Soh Tiong Hum says:

      Hello Wong, I do not know of amy companies that offer investment protection. For protection, there are two ways you can consider:

      1. Do-it-yourself with index options/futures/ETFs/CFDs, stock options/CFDs
      2. Talk to your private banker to personalise a solution.

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