Dow speeds Past 18K for Fifth Fastest 1,000-Point Rise in History

Big 5

The Dow Jones Industrial Average closed above 18,000 for the first time Tuesday, just 120 sessions since it first closed above 17,000 on July 3. That makes it the fifth fastest 1,000-point rise in the Dow’s history. It also marks the sixth time that the blue chip barometer closed above 1,000-point milestones twice in one calendar year.

Of the Dow’s 30 components, the biggest contributors to the index’s latest 1,000-point gain have been the shares of Visa Inc. V, +0.40% and Goldman Sachs GS, +0.55% which have added about 313 points and 167 points, respectively, to the index’s price. The biggest weight has been the shares of International Business Machines Corp. IBM, +0.50% which have shaved off about 169 points.

So what does Dow 18,000 mean for investors?

Jason Goepfert, president of Sundial Capital Research, said he doesn’t believe the milestone has much “practical significance.” If anything, Goepfert believes the average investor’s reaction to the Dow crossing above 18,000 is likely to be one of benign acknowledgment, with a little optimism mixed in: “Yup, there it goes. It’s better than going the other way.”

Dow Jones Industrial Average’s 1,000-point milestones

Trading sessions between 1,000-point milestones

Dow milestones

Date of first close above each milestone

24

11,000

5/3/1999

59

14,000

7/19/2007

85

7,000

2/13/1997

105

8,000

7/16/1997

120

18,000

12/23/2014

127

13,000

4/25/2007

139

16,000

11/21/2013

153

17,000

7/3/2014

182

9,000

4/6/1998

189

5,000

11/21/1995

226

6,000

10/14/1996

246

10,000

3/29/1999

975

4,000

2/23/1995

1,080

3,000

4/17/1991

1,460

15,000

5/7/2013

1,879

12,000

10/19/2006

3,573

2,000

1/8/1987

21,652

1,000

11/14/1972

WSJ Market Data Group

Goepfert doesn’t believe 1,000-point milestones will matter too much to investors until the Dow starts approaching 20,000.

“The rounder the number, the more important it could be on a psychological basis,” Goepfert said. “When we get to Dow 20,000, that could have more substantial triggers.”

Many Wall Street pundits and professional money managers have said the Dow isn’t a true gauge of the stock market, meaning there’s very little to glean about the overall market’s health from any new milestones the Dow reaches. They prefer to follow broader indexes, such as the S&P 500 SPX, +0.17%

But history suggests there’s very little difference between the two indexes. Since the start of the new millennium, the correlation coefficient of the daily prices changes in the Dow and the S&P 500 is 0.96, where 1.0 indicates an exact match. Basically, a new high for the Dow still means something. The Dow hit an all-time intraday high of 18,020.19 in morning trade Tuesday.

“For the individual investor, the Dow has more pull,” Goepfert said.

And longtime chart guru Ralph Acampora, who is known by many as the Godfather of technical analysis, has always said: “Don’t fight Papa Dow.” Acampora is currently the director of research at Altaira Wealth Management.

Source: Market Watch

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