It's quiz time! So don't peek at the chart until you've answered the question below. Our topic is the percentage of all-time daily highs in the Dow since 1900, a total of 29,552 market days. Now the question:
What percentage of the Dow daily closes since January 2, 1900 have been all-time new highs?
A) 4%
B) 8%
C) 16%
D) 24%
The correct answer is A.
The accompanying chart and calculations were furnished by Greg Morris, the Chief Technical Analyst at Stadion Money Management. Greg is also the author of two books on market analysis, Candlestick Charting Explained and The Complete Guide to Market Breadth Indicators. Yesterday Greg sent me the featured chart with this explanation:
I spend a lot of time with investors, usually trying to dispel all the myths about the markets that they read from "Wall Street." Here is a chart that shows the daily closes of the Dow Industrials since January 1900. The first plot is the daily Dow with green line showing previous new highs. The second plot has a vertical line (blue) depicting the days when the Dow was making a new all time high. The third plot is a commutation of those days (green line-right scale). The red line is a commutation of all days to be used in formula for last plot.
Fourth plot shows the percent of days making a new all time high. Most would never believe it is at 4%.
Here are the raw data:
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