The Dow Hits 10,000: Technicals Show the Earnings Rally Will Continue

James | Oct 15, 2009 | Comments 6

The Dow Jones topped 10,000 yesterday!!! First time since October 2008. Can you say we are on a rally? Only in March the Dow hit a 7-year low near 6,500 now popping 53% in a year. Big news? I think so. We have watched the DIJA go back and forth throughout this decade crossing this magical line many times. The question now is will it stay? Many folks are skeptical claiming that the bulls are running to far ahead of themselves. The markets right now are leading the pack and many people are scared that the economy is still in disarray, unemployment being the big issue. In this case, we are looking at the stock market being the leading indicator with unemployment being the lagging indicator. Throughout time the market has always traded six months ahead of a healthy economy whereas unemployment is usually six months behind. This being said the market is telling us come March we should see the unemployment rate start to fall. So with this all said, what’s next for the markets? In this case I think the Technicals are in our favor. I think 10,000 will become a support level and history backs me up. In the past, when the Dow has traded near 10,000 it has stayed there for many months, sometimes even years. Look at the graph below for proof. (The circled spots show where the Dow traded over 10,000 and for how long showing the support levels exist)

I think the Dow can trade up to 10,300 in the next month and a half being carried by both earnings reports and technicals. For one the 50 day is trading over the 200 day Moving Average indicating we are in a Bullish run. Plus with Goldman Sachs, IBM, and Google (Read this article on GS, GOOG, & IBM’s Earnings) all set to blow analyst out of the water this week, what’s going to stop the rally? I say nothing, ride the rally and don’t be too scared to jump back in the markets as if you don’t you will just miss out on the gains.

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