DJIA closing value on 2021 December 31
October 26, 2021
Summary: A bet on the closing value of the Dow Jones Industrial Average on 2021 December 31.
Background
What will be the closing value of the Dow Jones Industrial Average on 31 December 2021?
The possible answers are:
- Lower than 33,000.00
- Between 33,000.00 and 34,000.00, inclusive
- Higher than 34,000.00 but lower than 35,000.00
- Between 35,000.00 and 36,000.00, inclusive
- Higher than 36,000.00 but lower than 37,000.00
- 37,000.00 or more
CNBC's data will determine the outcome.
Updates
2021 December 23
- Lower than 33000: 0%
- Between 33000 and 34000, inclusive: 0%
- Higher than 34000 but lower than 35000: 0%
- Between 35000 and 36000, inclusive: 25%
- Higher than 36000 but lower than 37000: 75%
- 37000 or more: 0%
I think it's much more likely that we end the year in an uptrend rather than a downtrend.
2021 December 7
- Lower than 33000: 1%
- Between 33000 and 34000, inclusive: 3%
- Higher than 34000 but lower than 35000: 5%
- Between 35000 and 36000, inclusive: 11%
- Higher than 36000 but lower than 37000: 60%
- 37000 or more: 20%
The recent volatility/downturn reduces the odds of +37K. Other than that I still think the index is trending up.
My DIA trade hit its trailing stop target and sold automatically. My P&L shows a 3% loss. So I guess I set the trailing stop at 3%?
2021 October 26
- Lower than 33000: 1%
- Between 33000 and 34000, inclusive: 3%
- Higher than 34000 but lower than 35000: 5%
- Between 35000 and 36000, inclusive: 11%
- Higher than 36000 but lower than 37000: 40%
- 37000 or more: 40%
I'm updating my forecast to acknowledge declines are always possible. There's still an upward tilt. The odds of a small move up and a big move up seem equal.
I also put on a trade on DIA. I bought 3 shares at $357.86 per share. I also set a trailing stop order at 5%. And a reminder to sell on 2022 January 3.
I also tried my hand at an expected value calculation. I wasn't sure how to calculate values for ranges so I just used the midpoint.
- 33000 * 0.01 = 330
- 33500 * 0.03 = 1005
- 34500 * 0.05 = 1725
- 35500 * 0.11 = 3905
- 36500 * 0.40 = 14600
- 37000 * 0.40 = 14800
Current expected ending value for DJIA is therefore around 36365, or ~1.6% of profit on the DIA trade.
2021 October 23
- Lower than 33,000.00: 0%
- Between 33,000.00 and 34,000.00, inclusive: 0%
- Higher than 34,000.00 but lower than 35,000.00: 0%
- Between 35,000.00 and 36,000.00, inclusive: 20%
- Higher than 36,000.00 but lower than 37,000.00: 30%
- 37,000.00 or more: 50%
This seasonal chart suggests that DJIA has a tailwind from October to December. The data was only from the 2000s, though. This longer-term seasonal chart however suggests that the DJIA will be flat.
My naive technical analysis is that the stock market has taken a breather since July 2021. No strong movement higher or lower. We're more likely to have another move up rather than down.
There are a few component stocks that might be drags on the DJIA basket. Namely, Intel, Cisco, and Boeing. But I don't think they'll mess it up enough to drag down the entire basket.
I did an analysis of the earnings surprises for each of the component stocks (example) over the last 4 quarters. The weighted average surprise was:
- Q2 2021: 28.79%
- Q1 2021: 26.29%
- Q4 2020: -4.13%
- Q3 2020: 43.80%
Earnings 25% above expectations doesn't sound like big news but it's obviously not bad news either.