Today we technically analyse a circa 100 year Dow Jones price index (based on quarterly closing prices) against a 14 quarter period Slow Stochastic signal line and 14 period Relative Strength Index (RSI). The stochastic only shows the signal line just to make it easier to visualize as period signals on these very long term charts have no relevance for shorter term trading decisions. As our data goes back to 1914, the first 14 period signal only starts in 1917.

Linear historic price chart for the period 1917 to 2020 (interactive)

Stochastic slow signal line historic data on Dow Jones Index – period 1917 to 2020 (interactive)

For the Boomer generation, the surprise October 1987 drop in world stock indices looks like a mere blib on both the linear and log scale charts. Both the Stochastic and RSI only moved a mere 20%. The 1929-1932, 2000-2002 and 2007-2009 corrections showed a much stronger correction on the technical analysis tools.
The March 24 to April 9 rally is somewhat surprising in that we thought the market would be more in line with the perceived severity of the world economic downturn. The Dow Jones index, mirrored by the S&P, ralied a massive 30% from the March 22 recorded low as did most other major indices. The Stochastic signal line only dropped to the 77 level where the RSI below showed huge bearish divergence between Sept 2018 and Dec 2019.
As the present ‘too small and too big to fail’ support is the recipe for hyperinflation it is possible that stock prices may be technically adjusted up as well. However only a handful of services companies in food, transport and Fintech may show continued strong price-earnings ratio’s if… a V curve recovery becomes evident. Whether this is a realistic scenario remains to be seen as so many different aspects of mass behavior may surface and outweight the present Central bank controlled and manipulated market. Quarterly tools do not change overnight and one of the primary observations is the triple bearish divergence on the Stochastic signal line since 2015, rather similar to the 1997-2000 development.
Taking an Elliot Wave theory approach ending a Grand supercycle wave 3 or 5 looks like textbook. Interesting observation is that all major Grand super cycle acceleration peaks seem to have produced irregular all time price tops in 1929 (Wave 1), 2007 (wave3) and 2020 (Wave 3 or 5).
Although quarterly prices typically never show intraday highs and lows, the tools are calculated based on actual daily high and low closing prices during the quarter. This makes a quarterly chart fairly reliable and more useful for predicting the long term chances of trend continuation and the level of risk weight.
On the Stochastic signal line it surely looks like this has further to go and 18 to 36 months is quite a common period for this retracement cycle looking at the past 100 years.
Also the RSI looks like it has much further to go in this reaction even though intermediate moves can keep the stock market pausing in a broad price range and much monthly volatility.
The biggest uncertainty is what Covid-19 does with mass psychology. Will there be a ‘New Normal’ with more awarenesss and preparedness? Will we accept and maintain trust that massive printing of money in every corner of the Globe will not have the same logical effect as seen in Zimbabwe or Venezuela or Argentina?
With a bit of patience, textbook correction would be for the Dow to reach closer to the 10,000 level, which is the large intermediate consolidation between 2000 and 2009.

Interesting observation is that, over 100 years, the RSI below never touched under 30 on a quarterly closing basis. The recorded low for this period was 30.44 on 30 June 1932. Maybe in this cycle that trend will be broken and that risk should not be dismissed given the severity of this crisis.

RSI historic data on Dow Jones Index – period 1917 to 2020 (interactive)

Dow Jones Index historic chart – period 1917 to 2020 (Log scale – image – not interactive)