Meltdown Scenario for the Dow Jones Industrial Index

The new year 2022 started with a fresh All-Time High (ATH) in the Dow Jones:

Jan 04, 202236,636.0036,934.8436,636.0036,799.6536,799.65435,080,000
Dow Jones Industrial Index on 04.01.2022

Source: https://finance.yahoo.com/quote/%5EDJI/history?p=%5EDJI loaded 22.01.2022

Some authors keep warning of a final Melt Up in 2021/2022 before a severe turnaround:

Harry Dent: Stock Market Crash Coming in Early 2022

David Hunter predicts stock market crash by 80 %

What Is a Melt-Up?

A melt-up is a sustained and often unexpected improvement in the investment performance of an asset or asset class, driven partly by a stampede of investors who don’t want to miss out on its rise, rather than by fundamental improvements in the economy.

Gains that a melt-up creates are considered to be unreliable indications of the direction the market is ultimately headed. Melt ups often precede meltdowns.

Source: https://www.investopedia.com/terms/m/melt-up.asp loaded 22.01.2022

Are We Heading Towards A Meltup Or Meltdown? Here Is How To Prepare

Mar. 20, 2021 9:30 AM

Summary

  • Let’s say you are fully invested in the stock market, be they individual stocks or indexes.
  • The S&P 500 and Dow Jones Industrial have been up nearly 80% since bottoming in March 2020, exactly a year ago.
  • Are we heading into a new and prolonged bull-market, or are we heading blind-folded towards a cliff?
  • We provide a strategy to prepare now to capture most of the future gains while preserving the capital in the event of a correction.
  • Looking for a portfolio of ideas like this one? Members of High Income DIY Portfolios get exclusive access to our model portfolio.

Source: https://seekingalpha.com/article/4414856-meltup-meltdown-how-to-prepare loaded 22.01.2022

Meltdown in Numbers

If the 36 800 ATH of 04.01.2022 was the last high before the big crash, the calculation goes like this:

80 % drop: new low 7 360

90 % drop: new low 3 680

My scenario has always been that if the Dow Jones does not drop below the 2009 low at 6 666 points, the long-term story of always rising stock markets remains intact.

Schmitt Trading Ltd invented several trading robots that can also make profit in a huge stockmarket crash or long-term side movement.

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