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Dow 10,000: Does It Matter?

Though the 10,000 mark on the Dow Jones industrial average was, indeed, a barrier, most market professionals aren't giving it much respect.

"It doesn't mean a thing," sniffed Ralph Bloch, chief market analyst at Raymond James & Associates Inc.

"In terms of the Dow moving up [through 10,000], it does not connote anything positive," said A.C. Moore, chief investment strategist at Dunvegan Associates. Moore notes that when a market mounts a sustainable advance, it does so against a backdrop of fear, often called "the wall of worry."

The theory is that when investors are fearful, they've probably already sold most of their stock positions. That creates a surplus of buyers, sending stock prices higher. So he doesn't particularly like round numbers on the Dow because investor sentiment is usually very bullish at such points.

"Everyone at this point has their sockets set on the upside," Moore said. "I think that's an indication that the market is already in a high area."

Moore has better means of measuring the health of the market than seeing if the Dow cracks a millenium mark.

"Of more importance to us is that the broader market as measured by the advance-decline line makes a new high," he added. "That has not happened so far. Whether 30 stocks make a big, round number or not doesn't really impact things."

"It's a psychological threshold because it's a big number and a round number, just like 7,000, 8,000, and 9,000 were," said Edward Wedbush, president of Wedbush Morgan Securities. "Dow 10,000 is a little bit more impressive because it adds another digit ... I think it's unlikely for the market to break through 10,000 and then continue with a very strong rally."

"I think 10,000 is an important psychological number," said Robert Stovall, president of Stovall/21st Advisers. "It's one that hardly anybody thought we would reach in 1999 as recently as five or six years ago - and here we are." But Stovall sees other factors that are much more important in providing investors with guidance than a big, round number on the Dow.

"The market is largely driven by psychology, along with earnings, interest rates and inflationary expectations," he said.

Wedbush agreed. "If the economy's doing great and if inflation stays down then we're going to continue to have a good market here," he said, adding that history tells us the market generally won't burst through a milestone and follow through in a convincing manner.

"Just going on past experience, when most of these psychological barriers are achieved, you usually see the market rest for a little bit," he said. "A lot of people who are waiting to sell are more prominent in the market at that point."

Stovall concurred, having seen the Dow scale a major hurdle or two. He's been in the business since 1954.

"You should remember that from 1972 through 1982 the Do got above 1,000 and couldn't stay there," he recalled. "So that 1,000 barrier lasted over 10 years.

"It's important psychologically, but it shows that the market's been the place to be. And the people who deride 10,000 are the bears who aren't in the market anyhow."

"You have to go along with this market," Stovall said. "Interest rates are flat and they'll maybe even go down a bit if the manufacturing sector doesn't improve.

"The Dow has more of the heavyweight stocks than the Nasdaq does," he went on. "So maybe it'll mean a transferance of money into some of the commodity-related giants which have helped the Dow in its last finishing kick. The oil and gas stocks are supplying some of the horsepower now.

"But you just can't laugh 10,000 off."

Written By Kevin N. Marder, markets editor for CBS MarketWatch