The Path to DJIA 10,000 (C, AIG, JNJ, JPM, IBM, NWS, DIA)

The Dow Jones Industrial Average is within sight of the psychological 10,000 mark.  Again. This is a price-weighted index rather than a market cap-weighted index, which makes the index not as representative of the overall market.  Yet when Joe Public asks “what did the market do today?” that almost always means what the Dow Jones Industrial Average did.  And today the DJIA came within 1% of hitting the DJIA 10,000 mark.  This level is a psychological event and not a key technical event, and its member constituency earnings this week could easily make that 10,000 mark come true.  What is funny (or sad) is that if the most recent changes to the index weren’t made, we would have already seen the DJIA hit the mark.

Citigroup, Inc. (NYSE: C) has literally recovered 300% off its lows, yet it is still just a sub-$5.00 stock.  The reverse stock split, assuming it comes, will change that.  American International Group, Inc. (NYSE: AIG) was also booted and it has recovered over 500% since its lows.  Most traders now agree that had these stocks been left in the DJIA that we would have already hit the 10,000 mark.

The three components which could help to easily propel the DJIA this week are Johnson & Johnson (NYSE: JNJ), JPMorgan Chase & Co. (NYSE: JPM), and IBM (NYSE: IBM).  Here is a full preview of all DJIA components reporting earnings this week.

Johnson & Johnson (NYSE: JNJ) has a premium price compared to most DJIA components at $62.40 and it reports on Tuesday morning.  JPMorgan Chase & Co. (NYSE: JPM) has more of a median-price compared to other high-weight members, and it reports on Wednesday morning as the first of the real DJIA financial giants.  IBM (NYSE: IBM) is the only DJIA component with a share price of over $100.00, and it is on deck with earnings Thursday after the close.  J&J could be the tipping point stock, but if the markets hold static here and we get a solid report from IBM then that would be the tipping point.  Again, that assumes the rest of the market stays static and everyone knows that markets are not static awaiting an event.

Recent reports even notes that News Corporation (NASDAQ: NWS) even has its Dow Jones Indexes operations up for sale.  It is no fault of News Corp. that the index measurements are the way they are, but in theory a sale here could lead to a change in the calculation methods.

Today’s high on the DJIA was listed as 9,931.82, although we 9,920 is where most were eyeballing for the intra-day resistance.  This was still a high for 2009 so far.  Meanwhile, the S&P 500 hit 1,079.46 intra-day and we have seen 1,080 act as the resistance.  The intra-day high in the latest rally cycle was 1,080.15 and the highest closing bell price on the S&P 500 in the last month has been 1,071.66 on September 22.  Friday’s close was just shy of that at 1,071.49.

The DJIA is up 51% from its absolute lows of March, and the S&P 500 has rallied more than 61% from its absolute lows in March.

DIAMONDS Trust (NYSE: DIA) has ‘only’ hit $99.39, and in theory that trades at $100.00 if and when the DJIA hits the old psychological hurdle.  It is always possible that the DJIA could tip above the 10,000 mark without a corresponding move higher in the S&P 500.  It just seems that we will have to see that 1,080 taken out and for the S&P to move closer to 1,100 for this 10,000 mark to be pierced and for it to hold.

JON C. OGG