Morningstar Analyst: Dow 14,000 Here to Stay

It'll be interesting to see if Robert Johnson, director of economic analysis for Morningstar, will regret his assertion that it wouldn't be surprising if the Dow were to linger in the 13,500 to 14,500 range for some time.

The few times the Dow has surpassed 14,000 in the past, it wasn't long afterwards that it came plummeting down in a most aggressive manner. Johnson says he doesn't think that will happen this time around based upon his belief the economy is stronger than in the past when it hit those numbers.

He cited a stronger banking system and housing market as the main indicators for his outlook.

Johnson also sees stocks as being valued in line with the reality of the performance of the companies rather than being overvalued.

The major problem is most of the outperformance of publicly traded companies in the earnings season has come from cost cutting, even though revenue is up so far with the companies listed in the S&P 500 by 1.2 percent.

It's hard to understand why the Dow is approaching record territory with the very weak global and U.S. economy. There is no doubt the Dow will come crashing down, but it may have more legs on it than bears are thinking at this time.

Even so, this performance is living on borrowed time, as Spain remains a disaster in Europe, the U.S. economy contracted last quarter, the jobless rate for the week ending January 26 jumped by 38,000, and when including people claiming benefits from all programs at the end of the week on January 12, it soared to 5,914,983, a boost of 255,501 from the prior week.

How that is interpreted as something that has legs and isn't a major challenge has to be related to wishful thinking rather than facing reality.

Dow 14,000 Irrelevant Says Bogle

In an interview with CNBC, Vanguard Group founder John C. "Jack" Bogle, said the Dow hitting 14,000 "doesn't mean very much." He added that it's something "I can contain my enthusiasm about....”

The Dow closed Friday at $14,009.79, jumping 149.21 points. That brings the Dow to only about 155 points from the highest closing it has ever had of 14,164.53.

While retail investors have started to return to the market slowly, the fact that they haven't poured into the market is probably a good sign. Bogle said, “When mutual fund investors pile into equities, it's usually a very negative sign for the market.”

For the first three weeks of January, only $6.8 billion in net inflow came into mutual funds based in the U.S.

Concerning the failed Federal Reserve policy, Bogle said he opposes the idea of the Fed attempting to raise the price of stocks, as even if there is some success in that regard, it actually distorts the discovery of what the market is really saying.

“I don't know if anybody down there knows whether they are low or high at any time. I think the Fed should try to stay out of trying to influence the stock market. I think let the market decide.”

This also could be a reason a lot of businesses continue to hold back on expansion, as when forces like the central banks interfere in the market, it makes it more difficult to make decisions because it's harder to project the future probabilities because of the price distortions.

Bogle sees the U.S. economy growing at from 2 to 2.5 percent in 2013.

Gold Will Outperform Dow Says Parets

Those who understand currencies and their responses to stimulus measures by central banks, know that it devalues them, as the Federal Reserve has done from its inception in the United States, whereby the U.S. dollar has plummeted over 95 percent in value since 1913.

Inflation is another major factor, which always follows stimulus measures, or as it's called today: quantitative easing.

While those who invest in precious metals like gold and silver know they are the place to be when central banks go crazy with money printing, there is another metric to check for those that may not understand the relationship between gold and the increase of the money supply. And that is the Dow-Gold Ratio, which measures how much it costs gold to buy one share of the Dow.

According to Eagle Bay Capital hedge fund manager J.C. Parets, it is the right time to rediscover this metric, citing the strength of the data since 1999, when the gold bull run began.

At that time it took 44 ounces of gold to acquire 1 share of the Dow Jones Industrial Average. Parets says that in 1980, one ounce of gold would buy 1 share of the DJIA. So from 1980 to 1999, it went from a ration of 1-to-1 to 44.

In 2011 the ration was 6, and at the time of this writing it has risen to 8.

Since 1:1 has been the historic low of the metric, Parets said there is a long way from 8:1 to that low, and believing gold will undoubtedly outperform the Dow, he sees gold to still be a good investment even beyond the obvious impacts of the effect from overstimulating the economy and the resultant price movement of gold.

This is simply another piece of data to use in our arsenal to measure the price movements and probabilities of gold.

Alcoa (NYSE:AA) Continues Climb on China Commodity Imports

Dow movers Alcoa (NYSE:AA) and Caterpillar (NYSE:CAT) moved higher today on news commodity imports to China were higher than expects, with China's trade surplus dropping to a five-month low of $16.88 billion in September.

The Dow Jones Industrial Average and Standard & Poor's 500-stock index are both up today.

Alcoa rose to $13.38, gaining $0.18, or 1.36 percent at 1:14 PM EDT. Caterpillar increased to $80.95, gaining $1.61, or 2.03 percent.

Alcoa (NYSE:AA), Caterpillar (NYSE:CAT) Lead DJIA Higher

Alcoa (NYSE:AA) and Caterpillar (NYSE:CAT) are leading the Dow Jones Industrial Average to the fourth straight week in positive territory. For the month the Dow has gained 8.2 percent so far.

At 12:47 PM EDT, Alcoa was at $12.18, gaining $0.44, or 3.71 percent. Caterpillar stood at $79.89, an increase of $3.63, or 4.76 percent at the same time.

Perceived economic stability and upward revisions in durable-goods orders and sales of new homes for July seem to be the catalyst for the upward move, as August figures show durable-goods orders and sales of new homes were weaker than expected.

Orders for manufactured goods increased in August as well, and news that business confidence in Germany also added to the positive sentiment.

As has been happening throughout September, a large number of equity investors have seemed to pick and choose the economic news they wanted to include in making decisions, and ignore the many bits of news that created a mixed bag at best.

The Dow was at 10849.77, up 187.35, or 1.76 percent at 12:52 PM EDT.

Dow in Worst May in 70 Years

The Dow Jones Industrial Average is sure to glad May is almost over, as its performance in the Month before summer was the worst in 70 years.

You have to go back to 1940 to find a worst performance for the month.

In its final trading day of May, the Dow fell 122.36 points to 10,136.63, a 1.2 percent decline. The Dow finished down 7.9 percent for the month.

The Standard & Poor’s 500 Index dropped another 1.2 percent on Friday to 1,089.41, as financial shares took a hit after the downgrade of Spain by Fitch Ratings.

Alcoa (NYSE:AA), Sovereign Debt Crisis Pushes Dow Down

Alcoa (NYSE:AA) led Blue chips in a downward spiral as investors aren't convinced aluminum demand will increase this year, and the dangerous sovereign debt crisis in Europe threatens to spread.

Consequently the Dow dropped the worst it has in three months, falling 225.06 points, or 2 percent.

Other stocks getting hit hard were Cisco (Nasdaq:CSCO), which dropped 3.57 percent, and General Electric (NYSE:GE), which plunged 3.53 percent, and Intel, (Nasdaq:INTC), which ended the day down 3.01 percent.

The Dow Jones Industrial Average ended the session at 10,926.77 points.

Measured by percentage, the Nasdaq fell the worst, down 74.49, or 3 percent on the day. The S&P dropped 28.66 points, or 2.4 percent to 1,173.60.

Dow Jones in Largest Point Gain in History

The Dow Jones Industrial Average surged up by 936 points Monday, the largest gain in the history of the index. As far as percentage goes, the 11 percent upward move was the second-largest in the history of the Dow, and the largest since March, 1933.

Much of the positive move is credited to the Treasury Department giving out some details on the proposed "rescue plan." Of course the horrible performance of the Dow last week guaranteed there would be a significant rebound soon. Still, it was an impressive move by any standard of measure.

Another significant factor in the record-breaking upswing was early announcements that banks in Europe would start investing in troubled banks as well. The groundswell spread from there.

The Dow closed the session at 9387.61. Also enjoying he up day was the S&P500 Index, which swelled by 11.6 percent, ending the day up by 104 points.

The Nasdaq also moved up at similar levels, finishing the day up 195 point, or 11.8 percent.

While everyone was exuberant over the news, we do have to realize that the market is going to go up and down in large swings over the near term, and will have to get used to that as a temporary way of economic life.

Bottom Continues to Fall Out of Dow, Plunges to 5-year Low

Today's performance of the Dow Jones industrial average capped off the worst yearly performance in 34 years as the 679 point drop brings the total since last October 9 to a 5,585 point loss, or 39.4 percent. Last year on the same day the Dow stood at 14,164.53 at the end of the session. Today's drop was over 7 percent, finishing at 8,579.19.

The Standard & Poor's 500 index didn't fare any better as it also dropped by over 7 percent for the day, finishing the session down by 75.02, falling to 909.92.

Investor's nerves continue to be on edge as every negative announcement causes huge selloffs in the market. Today the main impetus was the announcement by a credit--rating agency that Ford and General Motors may have their ratings cut, which would tighten credit for them even more.

The Dow isn't making the type of history it would wish, as the decline of 2,371 points for the last seven sessions is the worst drop for that time period in history. Percentage-wise, the fall of 20.9 percent is the worst since the seven days ending on October 26, 1987, where the fall was 23.8 percent of the Dow. That seven-day period included the infamous Black Monday of October 19, 1987, where the Dow plunged by 23 percent in one day.

Also falling significantly, but not as much as the other major indices were the Nasdaq composite index, which dropped to 1,645.12; a 5.5 percent, or 95.21 decline. For the Russell 2000 index, it performed the worst according to percentages, as it fell by 8.7 percent to 499.20, a 47.37 drop.

The major refuges for investors has been short-term Treasurys, where most people are just looking to preserve their capital. Gold, as usual in times like these, has started an upward move as the economic news gets grimmer. It did go as high as $925 tonight, although after hours at about 10 p.m. EST it has fallen back to almost $914 an ounce.