Does the Dow at 19,000 Point to a Short-Term Pullback?

After the Dow Jones Industrial Average (DJIA) topped 19,000 for the first time ever, we took a look at how the index has performed after other millennium milestones

Nov 22, 2016 at 2:56 PM

The Dow Jones Industrial Average (DJIA) crossed the 19,000 threshold for the first time ever today, as the blue-chip index continues its journey into record-high territory. Against this backdrop, we took a look at how the Dow historically performs after topping millennium levels for the first time.

Dow millennium cross Nov 22

Starting with the first time the Dow muscled north of 10,000, the index has obviously crossed a 1,000-point interval nine times prior to today. According to data from Schaeffer's Senior Quantitative Analyst Rocky White, the Dow tends to underperform in the short term after these milestones, averaging a loss looking both one week and one month out, compared to average anytime gains since 1999. In fact, the Dow has been positive just 44% of the time one week after a cross, compared to 56% anytime.

However, going out three months after a cross, the Dow averages a gain of 1.65%, topping its anytime three-month return of 1.20%. The index has been positive roughly two-thirds of the time three months after a cross, compared to 62% anytime. The percent-positive is also higher than usual looking six months out, at 67%, though the average return is comparable to the Dow's anytime six-month return.

It's worth noting that the Dow seems to be more subdued after a millennium cross, too, comparing standard deviations. Looking three months out, the standard deviation of 3.61% is roughly half that of the Dow's anytime three-month standard deviation of 7.23%. In the same vein, the average three- and six-month losses after a millennium cross are close to half of the average anytime losses for the same time frame.

In conclusion, if history is any indicator, the Dow could be due for a pullback over the next few weeks -- echoed by this signal not seen since 1999. However, the index tends to outperform three months after a millennium cross, so perhaps we're on pace for a quick dip followed by a relatively low-volatility churn higher.

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