The Dow Jones Industrial Average today

The current moves of the Dow Jones Industrial Average are being watched by the world. There is no index that is more studied and analyzed then the Dow Jones. Started in 1896 it has become the bell weather index for the health of the US stock market.

 It’s also been driving the overall market direction for the past five years. If the Dow Jones can stay above its August 16th lows then we (that is the US stock market) will be in good shape (see chart at the bottom of text) For the past three months though the sideways movement of the index has been difficult for most of us to watch.

The movement of the Dow Jones Industrial average is the sum of all the knowledge known about the 30 stocks it tracks.   That means the Dow Jones knows everything there is to know about these 30 stocks. It knows what the CEOs know; it knows what you and I think we know. It knows what Ben Bernanke is thinking. It knows all there is to know and then takes that information and moves itself up or down based on this information.

 Right now the Dow Jones Industrial average is trying to figure out if there’s any more surprises coming from the sub-prime crises (that has gripped this market).

When Merrill Lynch came out with their first write off early this year, the Dow Jones Industrial Average thought most of the worst was already out in the public, the market’s reaction to this was the August 16th lows. But then Merrill Lynch wrote off another $8.4 billion in losses and then CitiGroup wrote off $11 billion losses and then Bank of America, Wells Fargo, Wachovia, E*TRADE all followed with billion dollar write offs. Now the market has started to wonder what else is out there. Like Dennis Gartman says, there is never one cockroach” and the market is looking to see how many more write offs there might be.

Given how bad things are out there right now; the Iraq war, the dollar losing 37% of its value since 2001, the trillion dollar deficit that the US government is running, inflation running at 7%, the sub-prime mess, the credit crises, the confidence crises, the foreclosure mess only increasing in size and depth and if that wasn’t enough then you have oil at $95 a barrel, wheat at $9 a bushel…and the list goes on.

Price Chart of the Dow Jones Industiral Average 

 The point is that the Dow Jones knows all of this and has still only gone sideways. That is what I call a strong market. Stay tuned to see whether the market moves up to new highs or breaks down below its August 16th lows.

The best is yet to come,

RC Peck