DJIA Performance: Average Third Year of Presidential Cycle

Tuesday’s market plunge of over 400 Dow points has drawn a lot of attention from the media. However, on a relative basis the decline was 3.3%, which, in fact, was the first significant decline since this “bull” rally started approximately five years ago. Typically, corrections during bull markets are anywhere from 10% to 12%. This 3% decline is nowhere near other bull market corrections. Don’t let all the media hype about this correction lose site of the fact that we are still in a bull market.

Look at above chart and recognize that two of the best performing months are March and April during the third year of the Presidential Cycle. Also, go back and revisit the “Halloween Indicator.”

Now, at what levels on the DJIA and S&P 500 will negate or call into question this current bull market? For the DJIA, the level is 11,783, or 4.5% from the current level. For the S&P 500, the level is 1,358 or 3.2% from the current level. At these levels, I would definitely become concern.