5 things to know about the Dow’s attempt to rally to 20,000 and beyond

It’s growing louder — and maybe even kind of annoying.

No, not that Christmas tune that drives you crazy, but rather the buzz around the Dow DJIA, +0.11%  potentially rising to 20,000.

The stock gauge finished last week only 243 points below the 20K mark, and it isn’t looking like it will give up much ground on Monday. The Dow Jones Industrial Average was trading slightly higher around midday.

Here are five points that Dow watchers are making as the blue-chip barometer nears another big round number.

Others see few impediments to rising to 20,000 and beyond.

The only thing that could derail the stock market’s rally is a massive change in sentiment, wrote Brad McMillan, Commonwealth Financial Network’s chief financial officer, in a blog post titled “Dow 20,000 in sight.” And such a shift in mood doesn’t look likely, given that economic reports keep coming in better than expected, he argued.

“With the very real prospect of corporate tax reform, it’s possible that earnings might come in even better than the current economic fundamentals would suggest, due to lower tax rates,” he said.

“Valuations might end up looking lower than they now seem, leaving more room for market gains.”

Bulls also point out that European stocks SXXP, -0.46%are breaking out as well this month, and some are already talking about Dow 50K.

2. Fastest 1,000-point gain ever? If the Dow closes above 20,000 on Monday afternoon, the index will have scored its fastest-ever advance from a thousand-point milestone to another.

The benchmark first closed above 19,000 on Nov. 22, and Monday is its 13th trading day since that achievement.

Thus far, the fastest 1,000-point rally came during the jump to 11,000 from 10,000. That happened in early 1999 over 24 trading sessions, as a recent MarketWatch story noted.

So even if the Dow can’t top 20,000 for 10 sessions, it still would score its speediest 1,000-point gain. Of course, as the gauge has climbed higher over the years, the percentage change associated with any 1,000-point move has become smaller.

3. Problems at big round numbers: The Dow has struggled with big milestones such as the 100 mark, the 1000 level and even 10,000. A recent Wall Street Journal column made that point.

The Dow first hit 100 in 1906, but didn’t trade convincingly above that level until the mid-1920s.

The blue-chip average first touched 1,000 intraday in 1966, but didn’t close above that mark until 1972, the column said. And the Dow first crossed above 10,000 in 1999, but only began to really live above that milestone in 2010.

4. The Goldman Sachs Industrial Average? Goldman Sachs GS, -1.64%  and other financial stocks XLF, -0.87%  have been key leaders in the “Trump rally” that began after Election Day.

It’s a similar story when looking at the year to date. The chart below shows how Goldman has contributed more to the 30-stock Dow’s 2016 climb than any other component. The graphic comes from Barron’s cover story over the weekend — titled “Get ready for Dow 20,000.”

Can financials keep leading the way higher? Bulls can argue the sector still has room to run, given that it’s trading well below its peak hit before the financial crisis.

But bears maintain that buying of banking stocks has reached panic proportions, suggesting a trend reversal over the next couple of weeks.

5. Bears aren’t throwing in the towel: The stock market’s doubters aren’t calling it quits just because another big round number is looming.

If everything is so bullish, why are bank insiders dumping their shares at a record pace? That was the question posed by Wolf Street’s Wolf Richter in a blog post on Friday.

Financial newsletter writer Harry Dent — known for his often-spectacular misses in forecasting — is getting attention this month for predicting the Dow could plunge by 17,000 points. Not tumble to the 17,000 level, but lose more than half its value.

Tune him out? Investors should consider giving a fair hearing to even Dent’s extreme views, according to a recent MarketWatch column by Chuck Jaffe.




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One Response to 5 things to know about the Dow’s attempt to rally to 20,000 and beyond

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