DOW 10,000 -- maybe in our lifetime?
Peter Eliades' Stockmarket Cycles update for Friday, March 12, 1999.
This is not an update that we anticipated doing. In fact we thought we
would not be doing it for a long, long time, but today the theoretical
high on the Dow Jones Industrial Average was 10,042.58. The magical and mystical 10,000 has been reached, not on a closing basis, nor even on an intra-day print basis, but on a theoretical basis and until recent computerized exchanges, theoretical numbers were the only Dow highs that we had for many, many decades. We got a few calls from the media today asking us about the importance of 10,000 on the Dow. We answered by telling them we would tell them the history of Dow 100, and Dow 1000 and let them be the judge of the importance of Dow 10,000.
The Dow Industrials first closed over 100 on January 12, 1906 at
100.25 and hit a high close of 103.00 on January 19, 1906. From there, the Dow declined 47% into 1907. It reached 100 again in 1909, in September,October, and November of that year with a high close of 100.53, finding great resistance at the 100 number once again. It then declined 45% into 1914, moved back to 100 again in 1916 with the month of November being completely above 100 all month long, but there was no close higher than 110.15 on November 21. It then declined 40%. Again in 1919 it remained just above 100 for a full year, May 1919 to April 1920, the highest close in that period, 119.62. But it then moved down 47% into 1921. Again, the area around the 100 level provided great resistance. Finally in late 1924, it closed decisively above 100 and kept going up into the 1929 high reaching almost 400 on the Dow. It had taken almost 19 years for a convincing breakthrough the 100 level after first getting above it in 1906.
How about the Dow 1000 level. 1000 was hit intra-day on a theoretical
intra-day basis on January 18, 1966 with a final high on February 9,
1966 just above 1000 at 1001.11, theoretical intra-day. The highest close in that period was 995.15. The Dow then declined 26% in eight months. It went up again towards the 1000 level in December 1968, but no move above, not even intra-day. The highs in December of '68 were 994.65 intra-day and 985.21 on a closing basis, then down 37% in 17 months. On November 14, 1972, the Dow saw its first close above the 1000 level, six and one half years after hitting it first time intra-day. The close was 1003.16, and it continued on for another 7-8 weeks with a high in that period occurring around eight weeks later at 1051.70 on a closing basis and 1067.20 on a theoretical intra-day basis, just above the 1000 level and then came the third largest Dow decline of the century, almost 50% down in December 1974, then up to 1000 once again in 1976, with a high close of 1,014.79 on September 21, 1976, again failing to decisively break above the 1000 level. It then declined 25% in March of 1978, then again back to the 1000 level
in 1980 with a reading of 1017 on November 20, 1980, then down again. Back again over 1000 in April of 1981, just above the 1000 level, then down 25% into August of 1982. Finally in late 1982, the Dow exceeded the 1000 level for real and has not looked back since then. It had taken the Dow almost 17 years from the first intra-day reading above the 1000 level to convincingly move above that level.
The next number, of course, is Dow 10,000. That number has now been reached almost 17 years after the 1982 low. It is happening on the worst breadth divergences at new highs since 1929. You be the judge. Is the 10,000 level important?.......
Stock Index futures traders, you shorted the June S&P at the opening of 1320.00 when the opening came above our shorting price of 1318.90........ Does it smack of mysticism or numerology? I don't care. In the law, there is an expression. "Res ipsa loquitur." The thing speaks for itself. Were there other numerical clusters that were equally significant resistance for the DJIA in this century, I would grant you its coincidental nature. That is not the case. Do I know that if IBM were retained in the Dow decades ago, it would have moved above 1,000 with alacrity? You bet I do. I am not working on "what ifs" here. I am working on what happened. The history of what happened coupled with the fundamental data and the cyclical and technical data strongly suggest the 10,000 level will not be just another reason for a CNBC special. For many of us, it could take the better part of our lifetime, if not longer, to be significantly surpassed. It is surely sobering research, especially for the "long term investing" school of thought. The more daring prediction would be that, one day after the Dow hit a theoretical intra-day high of 10,042.58, I proclaimed it would not close decisively over 10,000 for over a decade. The more realistic prediction based on the above research is that the Dow will not close above 10,300-10,550 over the next decade and probably not above 11,000 for the next 15-20 years. Could I be proved wrong in the blink of an eye? You betcha! Otherwise, it would not be a projection worth making. May the markets be with you all.
Peter Eliades
Stockmarket Cycles |
