DJ N.Y. Stocks Outlook: DJIA 11,000 Doable. Then What?
16:42, 2001-05-03
By Karen Talley Of DOW JONES NEWSWIRES
NEW YORK (Dow Jones)--The Dow Jones Industrial Average may be a cinch to crack 11,000 for the first time in six months, but after that the Blue Chip barometer could face tough times and technical resistance.
'Oh yeah, no problem getting to that point,' said Ned Riley, chief investment strategist at State Street Global Advisers.
The index, recently 10840.43, is just 160 points away and has momentum on its side, Riley said.'We're seeing broad support' and the strength of the Dow's many industry groups will help with push the index through.
Indeed, as investors return to the stock market, they tend to first gravitate to the biggest companies in their group - and the Dow is full of them, ranging from Microsoft for software to J.P. Morgan Chase for banking.
Riley is among market watchers who don't rule out a modest pullback after 11,000, which the Dow last closed above on Sept. 14. But they say any slide will be short lived.
Riley says that once 11,000 is pierced and we see 'the accompanying headline (that) we're just 700 points away from the Dow's all time high,' there will be powerful motivation for bulls. The Dow hit an all-time high of 11,722.98 in January of 2000.
To be sure, the industrials have been active. The Dow is up over 1,440 points since April 5, when it dipped past 9378.38 on an intra-day basis for a 20% drop from its all time high, the commonly accepted definition for being in a bear market. Wednesday, the Dow has been as high as 10939.20, a scant 60 points from the 11,000 milestone. The index was pushed back but the slip is not troubling, some traders say.
'We've had a good run and that's in our favor,' said Rob Cohen, head of listed trading at Credit Suisse First Boston, who envisions 'papers going up in the air' on trading floors once 11,000 is hit.
Indeed, the index may be only taking a breather before mounting its run. 'We may be contained for a bit, but I see us moving through 11,000 without much sweat,' said Leonard Weiss, principal at Weiss Wealth Management LLC.
Weiss pointed to last Friday's release of a strong first quarter gross domestic product as the watershed event that will give the market continued gusto. The GDP grew by 2%, suggesting the economy remains quite healthy, when many had been predicting a decline..
'Now people are adjusting their expectations upward for the rest of the year' and that will translate into stronger earnings that will propel stocks, Weiss said.
Still, not everyone says the Dow will have an easy time of it. The index may pass through 11,000 but the year will also see fallback, some say.
From a technical standpoint, the Dow faces 'tons of resistance' around 11,000, said John Roque, chief market analyst with Arnhold and S. Bleichroeder.
Most threatening is a big supply of stock coming to the market from investors who bought earlier around the 11,000 mark and want to be made whole, or show some profit, Roque said. 'I believe the Dow will be turned away at 11,000.'
If so, how low with the Dow go? Bill Meehan, chief market strategist at Cantor Fitzgerald, says the good news is the index will not retest its 12-month closing low of 9389.48 on March 22.
But the market is likely to suffer for some time, Meehan said. 'I expect a meaningful correction, with little sustainable action until the fourth quarter.' -By Karen Talley, Dow Jones Newswires, 201-938-5106 karen.talley@dowjones.com
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