The above chart uses the inflation data from ShadowStats.com. to recalculate the DJIA when adjusted for inflation (using year 2000 as the base). Please notice that January, 2000 was the all-time inflation-adjusted peak and the "value" of the index has been falling ever since. This chart clearly notes the 35 year inflation-adjusted stock market cycle (17.6 years down + 17.6 years up). It is not as visible on a standard stock chart, but when inflation is taken into account the cycle emerges. Adding 17.6 years to the DJIA peak in 2000 provides an estimate for the next low, Summer 2017.
By the way, just to clarify the curved lines on this chart. This chart is displayed as linear while the curved lines are logarithmic. I cannot display it both ways at once. Logarithmic lines are useful to denote changes in percentage rather than absolute linear value. This makes it possible to compare previous portions on the DJIA history with the current data. For example, the blue line represents extreme bull market peak levels tounched in 1929, 1966, and 2000 while the green lower line represents bear market bottoms, such as those in 1932, 1982, and what I expect to be in 2017. The 1948 low was not low enough to touch the green line, but it was a signficant low nonetheless. The future DJIA may very well show a printed price level above or near where it is today, it does not matter really, because after adjusting for inflation, the 2017 level should be much closer to 4000 (which coincidently, is roughly where the 1966 peak ended).
If the Shadow Stats inflation data is accurate, then what may happen is a repeat of the 1932-1948 sideways triangle. There were big rallies and smaller bear markets, but by 1948, the inflation-adjusted DJIA made very little real progress. Although the inflation adjusted DJIA went from 469 to 774 (a +65% increase...1932 bottom to 1948 bottom) it took 16 years to get there and the buy-and-hold investor had to endure 2 massive rallies (1932-36 from 469 to 1684 +250%, and 1942-46 from 700 to 1440 +100%) and 2 sizable bear markets (1936-42 -58%, and 1946-1948 -46%). I think we will experience similar roller coaster DJIA rides between now and 2016-2018.
The real bottom for the current US stock bear market is not expected until August, 2017, as the following chart demonstrates with the very consistent 17.6 year cycle. By then the inflation-adjusted DJIA should be below 4000 (the actual DJIA is likely to be much higher).
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