Dow 2020 Crash Watch - Update

Like 1929 the markets have bounced. This time it is on the back of the FED $6.5T money printing.


Previous Post: Dow 2020 Crash Watch 

But can the FED blow $6T every time the market rolls down to test support.

Yes, maybe before the US 2020 elections the FED will do 'what it takes'. But post elections not so much, the year 2021 is a long way from the next election (presidential or congress) and defense of the markets may not be so supportive at $6T or $10T per market smash. The FED may hesitate, and that will be window for stocks to break lower.

The 36 month simple moving average (SMA) is a good indicator of the Dow Jones trend (36 months is three years). It has been a good indicator of Dow break outs over the last 100 years.

Now, if you take the difference between the Dow monthly close and the 36 month simple moving average and convert it into a percentage change this is known as the 'Detrending Price Oscillator' or DPO. The DPO highlights how well a moving average performs, it also highlights momentum towards or away from the moving average.

Lets review the SMA(36) and DPO(36) during similar market changes: 1929, 1974, 1987, 2000, 2007. 



Chart 1929.

Chart 1974

Chart 1987

Chart Now

The concern is that this is on the table for 2021

Stay frosty, the next 6 months will forge trends for the next few years.





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