Wednesday, October 14, 2009

About the Dow Advance Over 10,000

Keep in mind that in June, General Motors and Citigroup were dropped from the Dow Jones Industrial Average and replaced with two stronger companies, Cisco Systems and Travelers Cos.

Without those changes, the Dow would be nearly 100 points lower.

This doesn't negate the fact that the Dow is in an uptrend, but it sure does weaken the strength of the advance. More important, volume remains relatively weak, and we are far, far from record new highs. Check out the 5 year DJIA chart, here (Note you will have to manually adjust to bring up the five year chart). This chart clearly shows we are still in the range of a dead cat bounce, and I seriously doubt that this market will be able to eat through the tremendous multi-year resistance just ahead that starts at less than 500 points away.


  1. A Google search on the recent 10,000+ DJIA and Peter Schiff brought up your post in April warning against the Schiff bear market prognostication. I like Schiff but I like multiple opinions too and looking at any DJIA performance chart shows that since April, the Dow has been on a steady tear, as you thought it would. I came to your mainpage to see how you've advised since April and it sounds like you believe we're coming near the end of this rally. Would be curious to know if that's an accurate assumption. I know nothing is precise but are we talking about another 14,000 here or are we within 500 points of the finish line?

  2. I think we are within 500 points of the finish line. There is no money printing and, from a technical perspective, there is major resistance at roughly 500 points out.

  3. Sometimes I feel like everybody treats the market as such an abstract impersonal concept… and it is in a sense. It represents the supply and demand of money free for investing I suppose. But what about the pure heart of it - at the core of the stock market isn’t it just someone giving someone else money to do something with it in return for a portion of the hoped for profit?