The Dow Heats Up: Why History Favors a Rally

Buying pressure on the Dow Jones Industrial Average has reached historic levels across multiple time frames, according to SentimenTrader. In a recent note, Jason Goepfert, senior research analyst, pointed out that the Dow has risen in 152 of the past 250 trading days—an impressive win rate of nearly 61%.

The only other times this level of consistency occurred were in April 2010 and May 2018, both of which preceded several months of volatile trading.

This momentum, however, extends beyond the short term. Over the past 100 weeks, the Dow has climbed in just over 60% of them—a solid recovery after a tough 2022, though not an extreme figure relative to the last 40 years. Additionally, the index has risen in 63% of the past 60 months and 80% of the past 15 years, both on the higher end of historical performance.

“The buying pressure isn’t limited to one or two time frames,” Goepfert explained. The current level ranks in the top 6% of all readings since 1900, and excluding the tech bubble of 1995-2000, it would be in the top 2%.

In the past, extreme upside momentum has sometimes led to sector exhaustion, particularly in utilities, but the Dow itself has generally fared well. Goepfert noted that when the average of rising periods across different time frames exceeded 66%, losses were rare, and the Dow often posted strong gains over the next nine months.

Goepfert also highlighted that the Dow has risen at least 60% of the time across daily, weekly, monthly, and yearly periods—a rare occurrence that has only happened six times. While returns following this signal have been mixed, particularly due to the 2018 global financial crisis, these signals have typically been followed by some continued gains, albeit short-lived.

In the two instances when the Dow showed both of these signals—once in 1959 and again in 2017-18—the index extended its rise for several months before hitting a period of stagnation. The latter lasted until the market recovery from the pandemic.

“The buying pressure across time frames is truly historic,” Goepfert concluded. “While this has generally been a positive signal for the next 6-9 months, the longer-term outlook is less clear. The late 1990s tech boom is the only precedent of sustained momentum, and bulls are hoping the current AI revolution will deliver similar results.