Dow 10,000 & Nasdaq 2000: Who Cares?

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. If we lived in the world Homer Simpsons 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
Source: Big Charts

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  1. Rob commented on Dec 10

    Did you see Jonathan Clements’ column in today’s WSJ? I think he is reading your blog. Or maybe you two just think alike sometimes.

  2. Sigh Man commented on Dec 25

    You’re a FOOL. Everyone knows these numbers are in and of themselves meaningless. But the whole ESSENCE of the word ‘psychological’, as used by finance media, is to convey the notion that since other people treat this number as possessing some sort of significance, you’d be a fool to ignore it. It may be circular reasoning, but better to circular reason and not lose money than tp boneheadedly say 10000 is no different from anythihng else, and then lose money when it hits resistance there.

  3. Barry Ritholtz commented on Dec 25

    Everyone knows these are meaningless numbers?

    I disagree. Many people — too many — think they are significant.
    Thats why CNBC breaks out the Dow 10,000 hats (literally)
    each time the index break thru to the upside. Given that its
    happened 19 times, one would think that they would have wised up by now. Oh well, thats bubblevision for ya.

    On a more personal note, I may be many things, but I do not believe a fool is one of them. But I must ask you — If everyone knows these numbers are meaningless, then why so a emotional response on your part?

    Me thinks thou doth protesteth too much . . .

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