The historical DOW

Some are concerned that the stock market is overvalued, and the bull market may end soon with a resounding crash. They have some valid points. US GDP, to date, has underperformed most modern recoveries. Corporate revenues have been soft lately due to the USD’s bull market. Interest rates are at historical lows and can only go higher, eventually. Record corporate stock buy backs have been helping to drive the stock market higher. Nearly everywhere you look Central Bankers are increasing their balance sheets by buying debt, and stocks in some cases. And, there are bubbles forming in the Bond market, Biotech, and Social media sectors.

The solution, it appears, to fill the void created by the private sector’s failure to service its debt during 2008, was to create more public debt. Which the FED, in the US, promptly bought as it increased its balance sheet. During the past few years corporations started using the bond market to finance their stock buy backs. This increase in debt, both public and corporate, has many concerned. Can the solution to a debt crisis be creating more debt? A strategy that certainly does not work in the private sector.

When we look back at the 130 year documented history of the US stock market, we can quantify each and every bull and bear market using OEW. Most of them only lasted a few years. Each of them had their own fundamental problems. Some of the problems proved to be correct, others took longer to unfold than most expected at the time, and many, in the end, did not matter. Throughout this long history there have only been five bull markets to last 5 calendar years or longer. Two lasted five years, 1932-1937 and 2002-2007. One lasted eight years: 1921-1929, and another lasted thirteen years 1987-2000. Notice 5, 8 and 13 years are all Fibonacci numbers. The fifth, of these lengthy bull markets, is currently underway. In calendar years it is in its sixth year, (2009-2015), in months its seventh year (76 months). In fact, as you can tell, it is the third longest bull market in the entire history of the US stock market.

Reviewing the four longest completed bull markets we find three of them had a price relationship to each other. During 1932-1937 the bull market rose about 4.75 times its value from the 1932 low. During 1921-1929 the bull market rose about 6.00 times its value from the 1921 low. And, during 1987-2000 the bull market rose about 7.25 times its value from the 1987 low. Notice the increment of rise increased by 1.25, or 125%, as the bull market stretched in years. The bull market we dropped from this comparison, 2002-2007, rose about 1.95 times its value from the 2002 low. Since the current bull market exceeded that level within its first two years, that bull market does not fit into this study.


When we review the internal wave structure of the three bull markets that are comparable, we find that two of them, 1921-1929 and 1932-1937, had short first and third waves then an extended fifth wave. Since this bull market has clearly had a short first wave, 2009-2011, and an extended third wave, 2011-2015 so far, it does not look anything like those two bull markets. It actually looks more like the 1987-2000 bull market above: its first, third and fifth waves were 3, 8, and 2 years respectively.


During that thirteen year bull market the first wave lasted three years, 1987-1990, and the DOW increased 87% from its 1987 low (see chart below). Then after about a 20% correction in 1990 for the second wave, the long extended third wave was underway. During this bull market the first wave lasted two years, 2009-2011, and the DOW increased 99% from its 2009 low (see chart above). Then after about a 20% correction in 2011 for the second wave, a long extended third wave has been underway. Notice, up to that point, the current bull market has been outperforming the 1987-2000 bull market in price and time. Currently the third wave is in its fourth calendar year, 2011-2015, which has five months to go. From the 2011 low the DOW has gained 76%, despite its choppy activity since 2014.

DOW 1990

Four years into the third wave of the comparable 1987-2000 bull market the DOW had gained 71% from its 1990 low (see below). Again the current bull market is outperforming the 1987-2000 bull market in price and time.

When we review the internal wave structure of each of the three rising waves during the 1987-2000 bull market, we currently see some comparisons as well. The first wave up took three years, rose 87%, and was a very clean five wave structure. The current bull market’s first wave took only two years, rose 99%, and was a clean five wave structure as well.

DOW 1994

Then over the next four years, from the 1990 low, that bull market rose 71% and became quite choppy. The current bull market’s third wave is in its fourth year, has risen 76%, and is also quite choppy.

DOW 1998

After 1994 concluded, during the 1987-2000 bull market, the subdivisions that occurred from 1990-1994, set the stage for the explosive uptrends into that 1998 third wave high. Interesting, right? Makes one wonder what is in store for this bull market.

One last comparison before we try to draw some conclusions. Seven calendar years into the 1987-2000 bull market the DOW had gained 148% from its 1987 low. Six calendar years into the current bull market the DOW has gained 184% from its 2009 low, with five months still to go. The current bull market is outperforming that bull market in time and price on every comparison.

Despite some negative fundamentals, and a near tripling in price over the past six years, this market is displaying price/time characteristics relative, or better, than some of the best bull markets in US history. It is already the third longest bull market in history, and should at least match the second longest which is eight years. It continues to outperform, in price and time, the 13 year longest and most explosive, +625%, bull market in history.

Before we jump to any conclusions there are two lower price levels to consider. And if either is achieved, it would still have been a spectacular bull market. These two levels were noted in paragraph four: a 375% gain (+4.75 from the low) and a 500% gain (+6.00 from the low). The first level equates to DOW 30,500, and the second DOW 38,600.

But let’s get conservative. The price gain relationship of the three best bull markets in history are: 4.75, 6.00 and 7.25 from their respective lows; or +375%, +500% and +625%. Since there is an increment of 1.25, let’s notch it down one level to 3.50 for this bull market. This suggests the DOW could gain 250%, or hit a level of 22,600 before the bull market ends. This gives us three potential levels going forward: 22,600, 30,500 and 38,600.

We offer this historical analysis not as a projection as to how high this bull market will go. We offer it to display the possibilities suggested by historical bull markets similar to the current one. Very few, I would imagine, expected the 1920’s bull market to reach the heights that it did at that time. Hardly anyone expected the 1990’s bull market to be the strongest and longest bull market in history. Many were calling for a top every time that bull market paused. Just like today.

Looking ahead we see this bull market probably lasting until at least 2017. Fibonacci number bull markets have occurred every time in the past. Although the sample is small. As for price. We currently have an SPX projection of 2500+ by 2016. This equates to about DOW 21,400+ using the current DOW/SPX price ratio. This is not too far from the most conservative level of DOW 22,600. But still a long way from the minimum historical DOW 30,500 level. However, if it does hit that historical minimum level, or even higher, before this bull market ends, it would not be anything that has not already occurred before. The next few years could prove to be quite interesting. Let’s see what unfolds.


About tony caldaro

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68 Responses to The historical DOW

  1. gtoptions says:

    Thanks Tony, excellent historical review. Very much appreciated.

  2. Dex T says:

    It seems like many of the recent posts disappeared?

  3. jzq108 says:

    Thank you Tony, great post, very helpful.

  4. zepfan123 says:

    So I see SPX tagged it’s ATH close from back in May at 2130 a little while ago. Semi-important now only because 2130 has acted as strong resistance at least a dozen times the last 2 months.-With all the hot action in the COMP the last week..also making a string of new ATH’s of course because of triple digit stocks like GOOG getting 15 to 20% gains in a day or two..i’m not sure the SPX action here at the 2130 area is quite as important as it normally might be. The BKX(banks) here around 80 at a 7 year high is also a concern of mine stopping the market from getting much of a pullback.-The VIX seeming to be getting comfortable in the 11/12 area isn’t favorable to a good swing short position either. Going to 10 or even 9 is possible if we just keep inching up into Aug and Sept. I hope not but it’s possible now.
    Too many key stocks like AMZN,LNKD,CMG and FB,amazingly almost at $100… up huge today as well.- 30 year old Mark Zuckerburg is going to be worth $50 Billion bucks soon if he’s not careful.- If this market is going to run back below SPX 2100 soon..I don’t see the signs of it myself. I’m sure not tasking a new long position here,but I’m not feeling that much of a pullback imminent either. I don’t play possible 5 point SPX drops. Guess I stay on the sidelines for the moment.

  5. H D says:

    Great read Tony- Thank you. “Fibonacci number bull markets” Those BOTs love math!

  6. Gary Lewis says:

    OK, looks like more one-way market for the foreseeable future. I’ll buy some SPX calls out to next year and check back in at the end of the year. Probably by then, most of the gold miners will be bankrupt as gold tests the $700 level and silver goes to $5. The Central Bankers will accept nothing less than total annihilation of the commodities sectors, I think. Expect some good bargains then. Until next year . . .

  7. uncle10 says:

    Thanks for the update and nice post on the Dow!
    I see we are getting that Sunday night dump on the yellow metal 🙂

  8. EagleSeagle says:

    Mr C r/t commodity X wave mentioned in a previous report. When do you expect this to begin? TIA.

  9. opader says:

    Hello Tony,
    Very much enjoyed your post. Thank you.

    MY thoughts on the market:


  10. nardobeme says:

    Great report Tony. Many thanks.

  11. Clearly a large amount of work and careful research went into this report, many thanks.

  12. M1 says:

    Thanks Tony !! Excellent special report !!
    It is supporting hearing such a bullish projection coming from you. No doubts this market looks very bullish.
    I’m just following the waves =)

  13. Awesome DJI Historical update Tony. But here is something to think about, as you have stated your update “the current bull market is outperforming the 1987-2000 bull market in time and price on every comparison,” from a calendar Fib view perspective;
    P1 = 2.156 yrs (close to 2 Fib)
    P2 = 0.425 yrs (close to 0.4 Fib)
    P3 (assuming May ATH) = 3.627 yrs (close to 3.625 a significant number in the world of mathematics)
    Also P1 peak to peak P3 (per above) = 4.052 years (close to 4 Fib)

    So just maybe this bull is on a 2 + 4 +2 = 8 year bull market sequence.

  14. asaraniti says:

    Tony, thank you for an interesting historical views of the Dow. There is 1 issue that you didn’t mention in your article that could have had a major impact on your OEW labeling….. would appreciate your thoughts.

    Since 2008, congress has signed many stimulus bills into law that pumped over 1 trillion dollars into our economy. Our economy has had approx. 8 trillion dollars of deficit spending since 2008 and the FOMC has pumped over 4 trillion dollars of liquidity into our economy. Some of this liquidity has found it’s way into the equity markets. Our Gov. took over, for all intent and purposes, AIG, Citibank, GM, backed stopped Fannie May and Freedie Mac all at tax payer expense and in my opinion “they are looking the other way” on how corporations report GAAP, Non GAAP earnings i.e. “one time charges”. All of which have a profound impact on P/E ratios.

    My questions are…

    1. how valid are your comparisons of our current bull market to previous ones when
    past bull markets didn’t have the same magnitude of stimulus?

    2. Do you think the OEW pattern/labeling would be “significantly different” without the magnitude of stimulus pumped into our economy over the past 6 years?

    I mean no disrespect to you or OEW, I am having a hard time understanding the viability of this rally. I believe the Gov. is providing a floor to our equity markets with it’s accommodated stance. and once these operations are reversed, I feel the equity markets will have a hard time to adjust.

    • Will they ever be reversed totally?

    • tony caldaro says:

      1. EW, and for that matter OEW, reflect wave patterns created by investors which take into account all information both real and perceived. Reaganomics, if you recall, also increased public spending in similar percentage terms.
      2. Yes, the world would probably had entered a depression similar to what has occurred in Greece.

  15. Lee X says:

    Thanks Tony

      • torehund says:

        Tony 1966 what a sweet year, well if the 7 years x 7 cycle of the Shofar blowing Jubilee is more than pure fiction I just can’t decipher sentiment can get much worse. Merkel should get her dancing shoes on, its about time folks can’t stand this mentally compressive neuroticism much longer 🙂
        Daddy longlegs are already swirling in the lamps here in Norway, sure sign of Autumn. They are hatching early this year.
        PS: I hope that you strike right with the above tune, all for the benefit of mankind.
        The shofar fits well with this goaty bull, and rams are also known for their inherent stubbornness.

        • tony caldaro says:

          religion has no place in the stock market
          it is used as a means of control and misinformation

          • torehund says:

            Haha Tony, faith is the only solution when my counts don’t work. I grip to whatever floats at times like these…Trump, religion, shamanism…whatever can possibly explain an exit, and I accommodate anyone that can possibly get us out of this total(itarian) all surrounding Stagnation of mind and spirit. Sometimes it feels worse than a real depression, history may prove me right 🙂 We can only see ourself clearly in Hindsight.

          • tony caldaro says:

            the Donald will keep you entertained
            three times bankrupt and worth $10bn
            knows the game

        • torehund says:

          This one is ready for the 13 year bull 🙂

  16. filipozze says:

    Tks Tony for the report. 2500 by 2016 is the target of SC III or the entire super cylce?
    thanks againg

  17. fishonhook says:

    Bold call indeed.
    BTW anyone subscribe to PUG. thinking of doing so. Any comments?

    • Rancho says:

      i am not a subscriber. but it looks like he is calling a cycle 1 top prematurely.

      • rcun says:

        PUG suggests a top in the 2135 to 2172 area and then a 25 – 33% correction back to the 1550-1575 support/resistance of the 2000/2007 high water marks.. Like Tony, he has kept his subscribers on track during these rising markets. In the very near future – the rubber meets the road. TONY versus PUG. One will be right and one will be… less right! : ) (based on the theory of alternate counts)

        Tony, an excellent weekend read. Thank you.

    • Fish, save your money and buy an old book by jack schwager titled ” Market Wizards” you’ll get so much out of it and will never have to rely on anyone’s opinion of which way the market will go as you will learn to be market neutral. Also, you may want to look up the story of Anthony Saliba, who became multi multi millionaire trading options.

  18. dsoble2014 says:

    The way you built it up I thought you were going to tell us we were going to hit 50,000. Very disappointing that the top may only be 35,000 or less. This will solve all of Illinois pension problems. I will sleep more comfortable knowing that fact. Rob Emanuel says thank you, Tony.

  19. Mr C, all I could think of while recovering from shock at my local med center (the rubber gloves didn t those words that seem to always ring true:
    “Past performance is no indicator of future results”.
    Then I thought of baseball and teams that go on winning streaks.For instance the Cubs in April win 5 in a row then in May win 8 In a row and in June win 13 in a row (they ll still blow the division even with that
    In July they win 5 in a row.If they win their 6th, to assume they re going to win their 7th(and 8th) in a row automatically would be problematical.I ve actually followed streaks in baseball for my side hobby and the fact that they ve already achieved these other streaks reduce the chances of repeating it.
    Also stockmarketwise, we ve only had one bull market of 13 years–a mere 30 years ago.To have TWO in that time frame would seem mathematically impossible.Obviously these predictions are based on the status quo continuing with regards to interest rates, buybacks etc.As we saw with Ebola last October, an unforeseen event could change the markets in a NY minute.But I always add your viewpoint to my thinking process and thank you for it.

    • tony caldaro says:

      Consider this.
      Three of the five longest bull markets in history are the last three bull markets.
      All three had a liquidity-driven FED, and the two that did complete ended with some sort of bubble somewhere. Then think QE and Biotech.

  20. manunidhi21 says:

    Namaste Tony!
    Amazing post but Newbie is going to be upset abt this.
    No room for bears ?

    • tony caldaro says:

      There’s always room for bears, nothing goes straight up unless lighter than air or propelled by an engine.

      • manunidhi21 says:


        “With those two event now in the books we will publish the report on Sunday. We will warn you though, the report is likely to shock both bears and bulls alike”

        it just shocked one side 🙂

  21. tomasso60 says:

    Thanks for your analysis Tony. I kind of wonder if the path towards the upper boundaries are a result of massive moves out of currencies around the world and then going into the U.S. dollar and thus moving into the most liquid areas of the capital markets.
    relatively safe to hold IBM and JNJ etc whilst everything else in home countries and commodities drop in value vis a vis US

  22. hkloon says:

    Tony based on this comment “We currently have an SPX projection of 2500+ by 2016. This equates to about DOW 21,400+ using the current DOW/SPX price ratio. This is not too far from the most conservative level of DOW 22,600. But still a long way from the minimum historical DOW 30,500 level.”, P3 = 22600 and P5 = 30500 level could be a possibility…?
    2nd question, i saw the labeling by Bill C, BTK is still in major 3 as compared to S&P, way to go until 2017? many thanks

  23. torehund says:

    Thanks Tony, yes if we ascend I think it could go to somewhere around 35 000, however that would have to be be an extreme.

    We all know that its cheap oil that makes China and USA great, and what better way to do it then crushing an over- bloated Euro. As oil looks doomed technically, a retest of the 10-30 USD level seems to be in the cards.
    Who will be the profiteers at the turn of oil; well Mexico has saved most of the black Gold due to an inefficient Government, and Russia will be a major exporter, as will a suppressed Iran. Brasil too will be awash in oil for some time and enjoy rising food prices (soon to make them a very prosperous nation). Peace as always will be found where there is nothing materially to Crave, like desertlike Peru, with or without a pair of flip-flops 🙂

  24. blackjak100 says:

    Interesting analysis and it definitely needs to be considered. However I need to see to believe and if S&P clears 2198 (a level I believe TC mentioned in the weekend update), I will be a believer. This will eliminate ED as wave 3 would then be the shortest. There is no doubt the ED does not have the best look because of the very shallow wave 2 retrace. In the meantime, accumulating calls after a 20+ pt pullback appears to be a no-brainer as it fits both counts.

    TC, I think Jeremy Siegel would appreciate your analysis!

  25. kjb0 says:

    Tony…..just to be clear. You are not calling for Primary 4 correction until Q1 of 2016 at SP 2500 ?

  26. Mark Eastman says:

    Thanks Tony for all your work. Do you have any concerns that the transports don’t seem to be coming along with the Industrials at the moment?

  27. hkloon says:

    A truly eye opener.

  28. fotis2 says:

    Thanks Tony simple, precise and to the point as always not suprised we going higher there are a few bullish signals in the immediate short term and I leave it at that for I am just a day and once in a blue moon swing trader so my view over the longer term is hazy.Nonetheless I think the Hornet’s nest has just been stirred so excuse me while I make some popcorn. 😉 🙂 GL

  29. asw 20 says:

    Thanks, Tony. A most interesting read indeed.

    Assuming the FTSE100 increases more or less proportionally then… Wow!

  30. stmro says:

    Very interesting analysis. Bookmarking so i remember to keep my eyes on these levels :).

  31. Thanks Tony for this report. Markets can reach extreme valuations, so I am not surprised by your analysis.

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