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Dow 10,000 & Nasdaq 2000: Who Cares?

Posted By Barry Ritholtz On December 9, 2003 @ 9:53 am In Finance,Media | Comments Disabled

There is this bizarre media fixation on “round numbers” in the market place. How many times have you heard the phrase the “psychologically important” number? (Too many).

Let’s clarify this right now, once and for all: These numbers are meaningless — Dow 10,000, Nasdaq 2000, when women turn 30 or when Grandpa hits 100. The derivation of all these round numbers is a function of a mere evolution oddity: We have 10 fingers and 10 toes. Because of that, we have a base 10 system [1]. If we lived in the world Homer Simpsons [2] inhabits, we would have a base 8 system. Some idiot would write an erroneous study on how women stand a greater chance of being kidnapped by terrorists than getting married after 32, instead of 30.

|sigh| Ain’t no cure for stupid.

The obsessive fixation on 10,000 is more a function of filling airtime than anything significant to investors. In actuality, Nasdaq 2098 is a far more significant number than 2000, as that was the high reached at the start of 2002. Regarding the Dow Jones Industrials, we’ve already penetrated to the upside the prior resistance of 9850. Previously, this level was the lower band of multi-year support for the Dow. That finally cracked in May 2002; Also of significance is 10,663 — where the Dow topped out in March 2002.

But 10,000? Meaningless.

Some other stats of interest: The Dow first crossed over 10,000 on March 29, 1999. Over the next three years (1999-2002), the Dow would drop below 10k, and cross back over it 18 times. Most recently, the large cap blue chip 30 stock index was over 10,000 in the last week of May of 2002.

Dow 10,000, weekly 5 year chart
click for full size chart
dow_10000_who_cares.gif [3]
Source: Big Charts [3]


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URL to article: http://www.ritholtz.com/blog/2003/12/dow-10000-nasdaq-2000-who-cares/

URLs in this post:

[1] base 10 system: http://en.wikipedia.org/wiki/Numeral_system

[2] Homer Simpsons: http://www.thesimpsons.com/bios/bios_family_homer.html

[3] Image: http://bigcharts.marketwatch.com/quickchart/quickchart.asp?symb=djia&sid=1643&o_symb=djia&freq=2&time=12

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