The Dow Jones Industrial Average just closed at a new all-time high.
Not a 52-week high. Not an intraday blip. An all-time closing high.
This is an index that dates back to the late 1800s. In all those decades – through wars, crashes, booms, busts, bubbles, and panics – it has never finished a trading day at a higher level than it did on Wednesday.
We’ve said it before, and it bears repeating: Do not fight Papa Dow.
It never ends well.
Multiple Timeframe Analysis
The Dow Jones Industrial Average is the most important stock market index in the world.
I didn’t always believe that. I used to think I was too cool for the Dow.
“Only 30 stocks.”
“Institutions benchmark to the S&P 500.”
“It’s price-weighted.”
I’ve used every one of those excuses before. And I was wrong.
There is wisdom in this index. And if you’ve spent enough time in markets, you eventually learn the same lesson:
Don’t fight the Dow!
It just closed at the highest level in its entire history.
After breaking out of a multi-year base back in August, price has done exactly what bull markets do – trend higher:
This is the highest close ever for the most important stock market index on the planet.
Merry Christmas, you filthy animals.
Now let’s zoom out.
The Dow is on pace to finish higher for the eighth consecutive month. Eight straight months of higher closes.
No hero trades. No noise. No narratives required.
Just trend.
Ask yourself how much easier the last eight months would have been if you had simply ignored the headlines and followed the Dow:
On both short-term and long-term timeframes, the message is the same:
Higher highs. Higher lows. Uptrend intact.
That’s because we’re in a bull market.
One day, that will change. The Dow will stop making new highs. It will correct. That’s inevitable.
But ask yourself this: How do you think the rest of the stock market performs while the Dow is correcting?
Probably not very well.
There is a time and a place for everything. And the only timeframe that actually pays anyone is NOW.
And right now – today – this market is in a bull phase.
If you’ve been fighting it, you’ve paid the price. If you’ve embraced it, you’ve been rewarded.
That’s how bull markets work.
It pays to ride trends. It’s expensive to fight Papa Dow.
Don’t do it.
Equally Weighted, Too!
Some indexes are market-cap weighted, like the S&P 500. The bigger the company, the bigger its impact.
Others, like the Dow Jones Industrial Average, are price-weighted. The higher the stock price, the heavier the weight.
And since we’re talking about the Dow, let’s address the usual objection head-on.
It doesn’t matter how dumb you think a price-weighted index is.
The market doesn’t care.
Because on Wednesday, the Dow 30 closed at new all-time highs on an equally weighted basis too:
So pick your methodology. Cap-weighted. Price-weighted. Equal-weighted.
Spin it however you want.
The conclusion doesn’t change: Stocks are in a bull market.
I know some people still don’t like the Dow. I get it. I used to dismiss it, too. I thought I knew better.
That turned out to be a mistake.
I eventually learned the lesson. And I’m laying it out here so there’s no confusion – and no excuses – when people look back on this period.
Consider this your receipt.
Merry Christmas.
And Happy Dow All-Time Highs.
Stay sharp,
JC Parets, CMT
Founder, TrendLabs