tsla

Eerily Quiet Dow Could Be a Bearish Signal

The Dow Jones Industrial Average (DJIA) hasn't traded in this narrow a range since 2014, which could be a bearish signal

Dec 23, 2016 at 10:24 AM
facebook X logo linkedin


After a massive post-election rally, the Dow Jones Industrial Average (DJIA) has been much quieter than usual over the past two sessions -- the quietest it's been in years, in fact. On Wednesday, the index traded in its narrowest range since July 2014 (on a percentage basis), and Thursday was another session in which the Dow traded in a span of less than 0.3%. According to data from Schaeffer's Senior Quantitative Analyst Rocky White, these periods of eerily quiet trading could be a bearish signal for the blue-chip barometer.

Below are all the times these signals have sounded since 2012, sorted by the intraday range. The narrowest day was Dec. 30, 2013, with the index moving just 0.2% intraday. As you can see, this past Wednesday and Thursday's intraday ranges rank third and seventh, respectively.

Dow chart 1 Dec 22


Historically, these periods have proved foreboding for the Dow. Going back to 2012, the index has been negative across the board, on average, going out one month after a signal. Plus, the odds of the Dow being positive at any of those points weren't even a coin flip.

Comparing anytime returns since 2012, the Dow's odds of being higher were greater than a coin flip, going as high as 64.1% one month out. What's more, the Dow averages a one-month anytime gain of 0.72%, compared to a one-month post-signal loss of 0.72%. The range-bound behavior tends to beget more range-bound behavior for the Dow, too, as you can see from the the lower-than-usual standard deviation.

Dow chart 2 Dec 22

If history is any indicator, the Dow's dream of taking out the 20,000 level could be postponed in the short term. However, the index is still on pace for its seventh straight weekly win -- the longest since November 2014. And, as Schaeffer's Senior V.P. of Research Todd Salamone recently advised, "If you are a short-term trader, be open to trades on both the short and long side of the market. If you are a long-term investor, do not disturb your bullish positions."


Let us help you profit from market volatility. Target big gains in short order with a 30-day trial of Schaeffer's Weekly Volatility Trader!
 

Two High-Octane Trade Ideas. One Simple Goal: Intraday Profits.

Dynamite Day Trading Signals delivers two same-day options trades every week — powered by proprietary intraday analysis and 43+ years of trading expertise.

But this isn’t just another stream of alerts.

It’s a structured plan with clear entry and exit points – designed for traders who want to act fast, trade smart, and wrap up gains before the closing bell.

No guesswork. No overnight exposure – Just two well-researched setups per week — whether you prefer buying premium or selling it.

And the results speak for themselves: subscribers have locked in +245.8% total profit over the last six months (since inception!).

👉 Start your one-month trial now for just $10, and be ready for the next trade alert.