Dow Trends: Learn from History to Thrive in the Market

Dow Trends 2021: History’s Lessons, Today’s Success

Updated Aug 2024

This is a market of disorder—chaotic, unpredictable, and immune to traditional tools and methods. Disorder defies conventional logic, rendering familiar patterns invisible to those relying solely on outdated frameworks. In such an environment, common sense must prevail over rigid logic, and mass psychology becomes the ultimate compass.

Technical analysis has its role, and certain elements of fundamental analysis—like short interest ratios and insider activity—can refine our outlook. Yet, as standalone tools, they often fail to capture the true essence of this market. Today, even toilet paper might provide more utility than blindly relying on these traditional methods. Those clinging to tools they believed would work forever may find themselves swapping roles with the janitor as this market reshapes the hierarchy of expertise.

Past Dow, trends suggest that the Stock Market Bull of 2021 has already exposed many top investors. These “experts,” caught unprepared, will be left scrambling, their reputations stripped bare. The reality is stark: the market is not your ally. It doesn’t care about your struggles or whether the dollar in your account is your last. It exists to serve one brutal lesson: hope is perilous, and fear is futile.

In this jungle-like market, the rule is simple: adapt or perish. There’s no in-between. We’ve consistently warned subscribers, labeling 2024 as “the market of disorder” to underscore its unrelenting nature. These labels aren’t meant to sound clever—they’re a reflection of what’s unfolding. This market will shatter the reputations of many former experts, even from the elite five-star clubs.

Adaptation is the only way forward, and the market spares no one unwilling to evolve.

Being too bearish in this pandemic-stricken US stock market can be costly.

That is apparently the lesson that Jeremy Grantham, co-founder and chief investment strategist at Boston-based money manager Grantham, Mayo, Van Otterloo & Co., learned this year as his fund has seen clients pull billions of dollars from his flagship fund as it has badly trailed the broader stock market Gratham has been painting a very dire picture of the investment landscape in the US, suggesting that rampant trading by out-of-work investors and speculative fervor reflects a market that may be the most bubbly he’s seen in his storied career.

“The cruel logic of being a value manager is that at the very time when your opportunities are at their best, your credibility with clients is at its lowest ebb,” he was quoted as saying.

Dow Trends: Is Value Investing Dead?

For now, value investing is effectively dead, overshadowed by the overwhelming presence of hot money flooding the markets. With interest rates locked in ultra-low ranges, investors seek high-risk, high-reward opportunities to double or triple their money quickly. While many of these investors will likely lose everything and more, their pursuit of astronomical gains will persist. Value stocks will still see periodic rallies, but they’ll pale compared to the explosive growth of AI and tech-driven stocks.

Adopting a bearish stance in such an environment is perilous. The markets trend upward almost five times longer than they trend downward—especially now, with a Fed seemingly powered by a mixture of stimulants. Ray Dalio continues to paint a bleak picture, but repeating the same pessimistic forecast while ignoring the market’s relentless upward momentum is, in many ways, a form of madness.

In 24 to 36 months, many former market darlings will have faltered, and some may be entirely wiped out. From this point forward, investors must exercise extreme caution around experts who let their emotions distort their analysis. Aspiring market students should come to understand that flipping a coin offers better odds than relying on hope and prayers in today’s market landscape.

Dow Trends: Park Your Emotions at the Door

Hence, if these so-called experts know this, why do they insist on tainting their analysis with useless emotions? Therefore, be wary of emotional experts. While some may have had a successful run in previous market cycles, this market is about to enter a ballistic phase. These so-called experts will be in for a rude awakening when it does. As the V-indicator pushes past 10,000 (only 70 more points to hit this milestone), expect the “polarization” factor and madness levels to surge to previously unseen heights. Logic will be thrown out the window, common sense will be replaced by stupidity, and anyone attempting to challenge the madness will face a painful lesson.

For the past few years, we’ve gently warned our subscribers not to wear their emotions on their sleeves. When the V-indicator surpasses 10,000, don’t think about trying to awaken the dead. In these situations, when in Rome, do as the Romans do. If you find yourself in a room with people holding opposing views, don’t dare challenge them unless you’re well-armed, with a group of friends, and prepared for a bloody fight.

The wisest move is to take a neutral stance, nod in agreement, and move on. The V-indicator is currently in an ultra-super trend. When it was launched many years ago, readings were below 500—consider how far it has travelled since.

Navigating a Market on the Brink of Ballistic Growth

The Rage Discontent Index has reached a new high, and we’ve seen three large spikes in the GP Index within the past four weeks. These developments signal something major before January 20th and point to the massive long-term changes already underway. These trends are unstoppable. One of these super trends is the AI revolution, which could evolve into an ultra-super trend. If this happens, we may see AI units with processing power equivalent to 10,000 to 100,000 human minds in under ten years. This could also mean life extension therapies becoming a certainty. The only way for the average human to remain relevant is by merging with AI (cyborgs) or evolving to at least the 4th level. Most high-functioning individuals operate at the 2nd or 3rd level and cannot surpass them.

The masses are stuck between levels 2 and 3. Anything beyond level 3 requires a complete shift in perspective—a theoretically simple concept but difficult for the human mind to accept. Achieving remarkable results through complex models is a difficult truth for most to grasp. This topic falls outside the scope of this publication. Still, we’ve provided basic materials (in the form of books) and have started a thread in both the Market Update Forum and the AI Trend Trader Forum, which are exclusive to premium subscribers.

A lot of cash remains on the sidelines, so any market crash will likely be short-lived, as much of this capital will soon flood the markets. The Fed is not messing around; it will force everyone to speculate or face significant losses.

According to Chicago-based Morningstar Direct, the total amount of money invested in money market funds—that invest in short-term bonds—hit a record high of $4.8 trillion in May. Though Morningstar reports that total money market fund assets dropped to $4.5 trillion in August (the most recent data available), these numbers are still significantly higher than the previous January 2009 peak of $3.8 trillion in total money market fund assets.

“Although not all of it is individual investors, it’s safe to say that individuals are holding more cash than usual,” says Morningstar. “Looking back over the past 12 months, it’s been a significant move out of equity funds into fixed-income funds, including money market funds.”

The AI Revolution: Unleashing Unstoppable Growth and Unforeseen Opportunities

Nervous nellies never win; their attitude ensures they will always be on the receiving end of the stick. This Fed is now operating from a super-aggressive mode; if necessary, another pandemic will be created to inject even more massive amounts of capital into the market. People are underestimating the power of AI. If it enters the Ultra Super Trend phase, the AI sector alone will dwarf nearly every other industry combined. What does this mean? AI can potentially increase global GDP by such a massive factor that the Debt to GDP ratio could decrease, even with all the new debt. However, that is a topic for another day. We will dive into it once we’ve validated that the AI trend has entered the Ultra Super Trend phase.

V-readings are incredibly high, and market participants are no longer as bearish as they were a few weeks ago. One of the characteristics of higher V readings is that they can widen the trading ranges. In simple words, it widens overbought and oversold ranges. For example, before the surge, Dow 30K would have been considered extremely overbought, but with the move up, the extremely overbought zone would start in the 30,600 range. Market Update Nov 24, 2020

Market Sentiment Shifts

If the current pattern remains unchanged, the ranges above could be tested relatively quickly. The gauge for the anxiety index continues to trend upwards, and this current move is the fastest we’ve seen in over two years. This suggests a market correction of 15% to 22% could be on the horizon. We appear to be entering a new phase of market sentiment.

The pattern we observe resembles a wave: an initial rise, followed by a slight pullback, and then another upward movement. If this pattern continues, a market correction may not take place until bullish sentiment reaches between 60% and 63%. This pattern has been seen in the last three bullish sentiment readings, which were 55, 48, and 50.

Moreover, we have established a new level for bullish sentiment, termed “ecstatic,” as we now believe the markets will only hit a long-term peak once the crowd becomes overwhelmingly enthusiastic.

Markets still have room to run.

The MACDs have not experienced a bullish crossover yet, but if they do, the odds are quite high that the Dow should at least be able to trade to the 30,800 to 31,200 ranges with an overshoot and get ready for it, with an overshoot to 33K. After that, the subsequent correction will be quite sharp, and the naysayers will focus on the pullback and mislead the crowd into believing the correction is the end of the world when, in fact, the markets will stabilise and most likely put in a higher low. Market Update Nov 24, 2020

The Dow appears on course to test the 30,600 to 30,900 ranges and could overshoot by a much wider margin. We will wait until the MACDs on the weekly charts have experienced a bullish crossover. However, the Nasdaq is probably the strongest market right now, and it is showing no signs of folding. It is the market that leads the way up that almost always also leads the way down. The first clues on how strong the ensuing correction might or might not be will come from the Nasdaq. Market Update Dec 09th, 2021

This outlook remains valid; traders should be prepared for a furious upward reaction if the MACDs on the weekly charts experience a bullish crossover. We suspect 2021 could be another year where the Dow experiences a move of 10K to 15K points. For example, the Dow sheds 6000 to 7500 points, then from the bottom, it tacks 10K to 15K points, for a net gain of 4K to as much as 9K points. Be ready for the unexpected; many traders will get butchered over the next few years. On the top of the chopping block will be value investors and investors who keep saying this style does not match my trading style. The only technique that will work is trend investing (based on MP). Traders looking for a style that fits what worked yesteryear will find out with shock how unforgiving the markets will be over the next 6 to 33 months.