Bracing for Record DJIA Close (DIA, SPY, QQQQ, IWM)

Go back just one-month ago right after all the market malaise.  It was a fairly small crowd that would expect the stock market to be back at record highs in only a four to six week period.

Today the DJIA is up 190 points to 14,086.51, more than 80 points above the record close seen over the summer.  We are still shy of the intraday DJIA highs of 14,121.04, but this is more than impressive on the back of poor banking news this morning.  The DIAMONDS Trust (AMEX:DIA) is also on highs at $140.77, above the prior high of $140.46.

The NASDAQ-100 is also at recent highs, but nowhere near all-time highs.  The PowerShares QQQ (NASDAQ:QQQQ) are one of the most liquid instruments out there and these are trading at $51.95 with the prior 52-week high (and well over 5-year highs) at $51.68.

The S&P 500 Index is a different measure and deemed as more representative than the DJIA or the NASDAQ 100.  The SPRD’s Trust (AMEX:SPY) are up 1.2% at $154.40, almost 1% under the prior recent highs of $155.53.  So there is still another 1% or more of actual resistance before new highs can be claimed across the board on broader markets.  The Russell 2000 at 823.12 is also well under the prior highs of 856.46, and its iShares Russell 2000 Index (AMEX:IWM) at $81.93 are also under the $85.74 highs.

So as you can see, the DJIA may be close to new highs, and the NASDAQ 100 may be close to recent highs.  But the broader S&P 500 and the even broader Russell 2000 still have some resistance.  This is still pretty amazing considering the news tones of four to six weeks ago.  Being a contrarian at inflection points can be quite rewarding.

• The VIX is under 17.50, see our "Under 20, Market Fear Is Gone";
• See "Q3 Window Dressing beneficiaries";
• The 50/50 rate cut has some ramifications if the FOMC gets too generous.

Jon C. Ogg
October 1, 2007