Dow Jones Industrial – Party Like It’s 1987 & Why That Is A Positive Thing (1988-2000)
Party Like It’s 1987 & Why That Is A Positive Thing
In this update, I want to share a view based on the idea of a repetition of the 1970-2000 period.
I noticed several similarities between the 1970-2000 period vs the 2000-2018 period, in particular for the Dow Jones Industrial.
Let’s start with the Monthly Chart.
DJI Monthly Chart 1
On the left side, we see the DJI starting from the year 1970. The DJI moved sideways for 13 years (1970-1983) and then breaks out to the upside (1).
After a break out, often a retest of previous resistance will take place and so it did in 1984 (2). What followed was a vertical move up that lasted till the red trend line (7). And then price snapped to take out the lows of (4). And then a 450% price increase unfolded, 1988-2000.
Fast forward to today’s market. On the right side of the chart, the DJI today. The period 2000-2016 resembles the sideways pattern of 1970-1983 and the low of Jan 2016 (2) resembles the successful break out and retest of the 1984 pattern (2). After the (2), (3) up and (4) down evolved. Now, wave (7) up is in progress.
For the targets of wave (7) up, I will use the Monthly zoomed in chart and the weekly and daily charts.
DJI Monthly Chart 2 – Zoomed in (7)
Left side = 1987 period, right side = 2017 period. Wave (3) followed by wave (4). Wave (5) was the start of a break out to the upside and wave (6) formed a higher low (HL) and then the final surge up to form wave (7).
Black resistance is at 24.700 and red resistance is at 25.800. If the pattern repeats, then the upside potential is at 25.800 (+4%) and the downside risk is a retest of 1st support @ 20.000 = -20% and ultimately it will likely take out the lows of (4).
DJI Weekly Chart 1
Price has deviated a lot from the base trend (green trend channel). There still seems some time left to unload the long positions, hedge your risk and/or buy insurance.
A retest of support @ 16.000 before Q2 of 2019 is over, seems to be written in the stars.
DJI Weekly Chart 2
Target for the (7) up is at 25.700/800 area, +4% upside from current levels.
DJI Weekly Chart 3
Same pattern, same outcome?
DJI Daily Chart 1
Wave 3 and 4 formed a sideways pattern. Point (5) marks a break out, (6) is the Higher Low followed by a parabolic move up to form (7).
The 7th wave up is often the exhaustion wave up.
DJI Daily Chart 2
The (6) is a Higher Low, then (7) is exhaustion.
Let’s see how far this has to run…maybe 25.800, maybe even 28.000 (see monthly chart) but if the pattern keeps on rhyming, then the risk is to the downside for the next 12-24 months.
Total Portfolio Strategy:
If you want to read more about my Total Investment Strategy, then please read this update first: 2017 Performance and Total Portfolio.
This is what I will do over the next couple of weeks/months:
- I will add monthly to a mutual fund (worldwide stocks), as I expect stocks to skyrocket into the year 2030, peak of flight to private assets;
- I will add 2% of my assets to buy put spreads AEX Dec 2018, as a hedge for my equity exposure, medium term trade (12-24 months, 2018-2019);
- I will add 7% of my assets to to my 2018-2019 eToro hedge strategy: – Hedge US Stock Market for a 20%-40% crash
- I will contribute small amounts to interesting ICO’s and tokens that pay out a periodic cash flow;
- I decreased my crypto exposure from 20% of total assets to 5% of total assets;
- I will add to my short sovereign bond strategy (rising interest rates) when rates come down a bit into 2018.
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