The DJIA 10,000 Psyche (AIG, C, DIA, SPY, GLD)

While everyone is stuck talking about the one year anniversary of the Lehman implosion and the real start of the next-to-last big leg down in the financial sector, there is a significant development taking place that is more psychological than anything.  The Dow Jones Industrial Average is within 300 points of the 10,000 mark.  What is interesting, depending upon how you would calculate the stocks now after a reverse split, is that had American International Group, Inc. (NYSE: AIG) and Citigroup, Inc. (NYSE: C) been left in the DJIA we would already be right at the 10,000 mark.  Changing index components can bite both ways.

But here is the issue at hand to consider in DJIA 10,000. All major indexes have crossed above their key psychological levels.  The S&P 500 Index is up over 1,000 and even up over 1,050 with many calling for 1,100 or higher.  The NASDAQ is above 2,000, and actually is now above 2,100.  Gold is back above $1,000 and may be back in a range where it could break out on the charts if it does not sell off like it has in the past.  This has drug all of the key ETFs that track these above levels as well.

The SPDRs (NYSE: SPY) ETF tracking the S&P 500 Index is up well over $100.00.  We just saw the SPDR Gold Shares (NYSE: GLD) cross above the $100.00 mark very briefly for the first time in almost 18 months since March 17, 2008 when it hit $100.44 intra-day and closed at $99.17.  That has been a crucial level that has not been able to hold up, and this always trades at a slight discount to spot gold because of fees and tracking.

Overseas, we have seen the Nikkei in Japan stay above 10,000 and the Hang Seng stay above 20,000.  In short, the only major index out there that has yet to hit and cross the critical psychological threshold is the Dow Jones Industrial Average.  That has yet to hit 10,000 even if we are a mere 280 points shy of it today. Yesterday’s intra-day high was 9,745.91 and it closed at 9,683.41, which is both the current up-cycle intra-day high and the high close.  Today’s high has so far ‘only’ been 9,725.65 as of 11:00 AM EST.

If these other indexes hold their gains in S&P 500, NASDAQ and elsewhere, then it is just a matter of time before the DJIA hits the key 5-figure reading and that the Diamonds gets a three-digit handle on it.  Had it not been for the index changes, you could argue that the classic DJIA already made it.

Outside of key psychological levels that are nothing more than benchmark numbers, the real question is that if and when we hit 10,000 if that will trigger the wave of selling that so many are waiting for.  Stay tuned.

Jon C. Ogg
September 16, 2009