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

GJ Open asks:

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.