General presentation of the Dow Jones Industrial Average:
First we shall take a few minutes to take a close look at the Dow Jones Index and its role. This stock market index was originally created in 1896 by the economist Charles Dow. Since its creation the DJ30 index has experienced a strong expansion and over time has become one of the most traded indices on the American stock markets next to the Nasdaq, the S & P 500 and the Russell 2000.
Given the age and history of this stock market index, the Dow Jones also enables an overview and understanding of the historical growth of the American economy over more than a century.
The Dow Jones Industrial Average which is more commonly known as the Dow Jones 30 is a well established and respected index on the American stock markets. As indicated by its name it is composed of the 30 top American companies in terms of stock market capital.
Concerning the calculation of the Dow Jones index rate it should be noted that this index is weighted according to the value of the company shares of which it is composed, not according to the companies’ stock market capitals as is the case with the Japanese Nikkei 225 stock market index. This fact is important as it directly influences the weight each company can have in the calculation of this index.
The Dow Jones is not only followed by stock market investors, it is also monitored by economists worldwide as it is one of the oldest indicators of the American economic health. It is therefore considered that a rise in the rate of the Dow Jones Index represents a growing American economy whereas, to the contrary, a fall in the rate of this index indicates a crisis or recession of this economy.
Although the Dow Jones is particularly popular with investors, the same is true for some of the assets of which it is composed which are highly sought after and traded throughout the world such as Nike, Walt Disney, McDonalds and Goldman Sachs. In fact, all activity sectors are represented in this exceptional stock market index.
Historical evolution of the Dow Jones stock index :
- 1884: This is the year Charles Dow created the index with 9 railway companies as well as Western Union and Pacific Mail.
- 1886: The index begins to be published and includes General Electric. Its first quotation is 40.94 points. On August 8 of that year, the index hits an all-time low of 28.98 points.
- 1929: The Wall Street crash hits the Dow Jones index hard and it records record losses of 52.67% in 1931 and 41.22 points in 1932.
- 1973: With the new crash, the Dow Jones index lost 45% of its value between January 1973 and December 1974.
- 1999: In December, the index broke the 10,000-point barrier for the first time. In the same year, it includes the companies Intel and Microsoft.
- 2000: The Dow Jones reaches a record high of 11,722.98 points.
- 2007: A new record of 14,198.10 points is reached on 11 October 2007 before a fall of over 17 months.
- 2008: The Dow Jones recorded record losses, closing below 8,000 points. In March 2009, the index will end a session at its lowest level since 1997 at 6,547.05 points.
- 2013 : The Dow Jones rebounds to 14,413.17 points in less than 4 days.
- 2014 : The index breaks several successive records with a first high at 17,138.20 points in July, at 17,279.34 points in September and 18,000 points in December.
- 2017 : The Dow Jones crosses the symbolic threshold of 20,000 points in January, then 21,000 points in March, 23,000 points in October and finally 24,000 points in November.
- 2018 : The Dow Jones continues to rise and reaches 25,000 points in January and then 26,000 points a few days later.
- 2020 : The index reaches a record high of 29,551.42 points in February before falling due to the Covid-19 pandemic. The worst day in its history was 12 March 2020, when it lost 2,352.60 points and fell by 9.99%. On 16 March, the index will lose many more points with a total of 3,364.7 points since the 12th. However, on 24 March, the Dow Jones recorded its biggest percentage increase with a gain of more than 11% or 2,112.98 points. It then managed to reach 27,000 points again on 3 June before climbing to 27,272.3 points. Finally, it will end the year up thanks to the success of the Pfizer vaccine.
- 2022 : After a long bullish recovery, the index reaches a new high of 36,805 points in January, before falling back to 32,554 points in March on the back of the conflict between Russia and Ukraine.
What are the opening days and periods of the Dow Jones Index?
As you can imagine and given that the Dow Jones is an American Index, the trading hours and the quotation times of this index are not the same as those of the European markets and stock market indices.
Concerning the time when it is possible to invest in the rate of the Dow Jones index, the opening hours are from 9.30 a.m. to 4 p.m. Eastern time. The opening of the American stock markets trading period is in fact when the Asian markets have already been closed for two hours. However part of the American trading session overlaps the European trading sessions as the European financial marketplaces are still open when trading starts in the USA. These trading periods when the American and European markets are both open simultaneously are particularly volatile with traders from both areas extremely present and active, the volumes traded are also of course very high.
We then note a general downturn in trades at around 10 p.m. European time until the Asian markets open. However, given that the trading on the Dow Jones is completed through the use of derived products it is possible to take position at almost any time on its rate.
Attention should also be paid to the opening and closing days of the American stock markets which may not be the same as those of the European markets in certain cases. Of course, the quotations for the U.S. market are available from Monday to Friday with a break over the weekend. The American stock markets are also closed on the American bank holidays which are as follows:
- The 1st January for New Year
- The 15th January for Martin Luther King Day
- The 19th February for President’s Day.
- The 30th March for Good Friday
- The 28th May for Memorial Day.
- The 4th July for Independence Day
- The 3rd September for Labor Day
- The 22nd November for Thanksgiving
- The 25th December for Christmas Day
It should be noted here that the economic publications in the United States are also not released at the same time as in Europe. On the market brokers online trading platforms you will find economic calendars that will enable you to learn when the major publications and announcements are expected from the American government. Certain events such as the publication of economic figures, political events or meetings of the Fed are particularly followed by investors and can sometimes occur when the European markets are closed.
How do you perform a technical and fundamental analysis of the Dow Jones?
The two types of analysis to use if you want to get bullish or bearish signals from the Dow Jones are fundamental and technical analysis.
The first analysis, fundamental analysis, is an analysis that will use the market events and publications that are most likely to influence the price of this stock index. Since the Dow Jones reflects the US economy, it is important to keep a close eye on the events that impact the economic health of this country and the different publications of figures such as the unemployment rate, durable goods orders or GDP.
Technical analysis will focus on the study of trends and chart volatility of this index. The objective of this analysis is to discover cyclical movements in order to predict possible future movements. Technical indicators such as MACD, Bollinger Bands, RSI, moving averages, pivot points and support and resistance levels are used for this purpose. All these indicators can be displayed live on the customisable charts provided by online brokers and dealers.
How to invest in the Dow Jones online?
There are several ways to invest in the Dow Jones stock index online and we will detail them here.
Firstly, you can invest in the stocks listed on this index by buying them in cash with an ordinary securities account, or by speculating on their price evolution with derivatives such as CFDs or contracts for difference.
You can also choose to invest in the Dow Jones index itself. For this, and given that the Dow Jones is not a moveable asset, there are two methods. The first is to use an index ETF. This is a stock market product that will reproduce the composition and therefore the evolution of the Dow Jones more or less precisely.
Finally, CFDs, or contracts for difference, also allow you to trade on the rise or fall of the Dow Jones price without having to buy securities or other stock market assets. As the name suggests, these contracts generate gains or losses from the difference in price between the time the position is taken and the time it is closed.