In order to constitute a "signal," the three-month relative strength of the DJT to the DJIA had to be 0.92 or less, and the DJIA had to be positive (so a signal isn't generated when the DJIA falls 8% and the DJT falls 20%, for instance). Until now, we haven't seen a signal since December 2015. Prior to that, you'd have to go back to September 2012. There have been only eight of these signals since 2000.
Going back to 1950, there have been 40 signals in all, and the DJIA has fared poorly afterwards, averaging losses at the two-week, one-month, and three-month marks. Further, the DJIA was positive less than half the time at each of these markers. For comparison, the Dow is typically positive at these markers, looking at anytime returns since 1950. The biggest discrepancy comes three months after a signal, with the DJIA averaging a loss of 0.2%, compared to an anytime three-month return of nearly 2%. Standard deviation is higher for the DJIA after a signal, too, pointing to elevated volatility.
Chart courtesy of Trade-Alert
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