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NEW YORK, Feb 19 (Reuters): Modest but steady gains from US stocks in the past few weeks have sparked trader talk that the blue- chip Dow could soon breach 11,000, a level not seen in more than 3-1/2 years.
While only fractionally lower for the year, the Dow Jones industrial average has gained 2.6 per cent over the past month, and chart analysis of the index shows it has established substantial positive momentum during its current run.
"I think 11,000 is in people's sights as a reasonable target and will become much more in people's sights when the averages start to break through their December highs, which we were right at a couple of days ago," said Ken Tower, chief market analyst at Cybertrader, a subsidiary of Charles Schwab Corp.
If the Dow hits 11,000, it will revive chatter of the average being within striking distance of its all-time high. At 11,000, blue chips would be just 6.0 per cent shy of their all-time high of 11,750.28 on January 14, 2000.
Carving out new highs would mark a comeback for the Dow, which was the weakest performer last year against the Standard & Poor's 500 Index and the Nasdaq Composite Index. For 2004, the Dow rose 3.2 per cent, the S&P 500 gained 9.0 per cent, and the Nasdaq Composite Index rose 8.6 per cent.
So far this year, the Dow has asserted a degree of leadership, partly helped by strength in energy company Exxon Mobil Corp, which has gained as oil prices remained well above $40 a barrel. Although all three indexes are currently negative for the year, the Dow has sustained the smallest per centage loss.
The Dow rose to 3-1/2-year closing highs in December.
Traders say the 11,000 figure is more of a psychological number than a technical resistance level.
"I don't think 11,000 will be much more than a psychological resistance level, because it's a round number," said Marc Pado, US market strategist at Cantor Fitzgerald & Co.
"I was looking for a week or two of pullback and then for the market to start to rally-so sometime in March or April, we should be able to surpass the 11,000 level."
Schwab's Tower is more optimistic, thinking there is a chance of hitting the 11,000 mark before the end of February.
After a dismal start to 2005 -- in January, the Dow saw 12 down days against just eight up ones-February has been decidedly brighter. For the month through Thursday's close, the Dow has had seven days of gains versus five of losses, and on up days, its average daily rise has been higher than in January, while on down days, the average loss has been smaller.
Tower also contends the Dow has a long shot of hitting a lifetime high sometime in the summer.
"The Dow also has an outside shot at an all-time high, which the S&P and Nasdaq do not have. The Dow fell during the bear market of 2000- 2002 by much less than the S&P and Nasdaq.
"That would generate a lot of buzz and would be a fitting end to this bull market, for the Dow to at least flirt with that all- time high.
"Unfortunately, the stock market and the economy move in cycles and the stock market has been rising since October 2002 -- that makes this year the time when this bull market probably reaches its peak and sets us up for a bad market next year."
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