Why can't the Dow close above 16,000?

It takes investors some time to believe there's a reason to bid stock prices above an important milestone like a 1,000-point.

By Benzinga Nov 21, 2013 10:59AM

Stock market © Digital Vision/SuperStockBy Charley Blaine


So, why can't the Dow Jones Industrial Average ($INDU) hold above 16,000?


Or the Standard & Poor's 500 Index ($INX) close above 1,800 or the Nasdaq Composite Index ($COMPX) move smartly above 4,000?


The short answer on Wednesday was that the Federal Reserve got in the way. But there's a longer-term answer. Whenever the market reaches an important number milestone, it takes investors some time to believe there's a reason to bid stock prices above an important milestone like a 1,000-point.


And sometimes they don't see the point, and stocks tumble.


So, the situation with the U.S. stock market is this: The Dow crossed 16,000 for the first time on Monday, but couldn't hold that level through the close. It crossed 16,000 on Tuesday and again on Wednesday. But, again, it couldn't hold the level. The S&P 500 crossed 1,800 for the first time ever on Monday, but, like the Dow, it couldn't stay above this new high.


Wednesday's pullback was mostly because of the minutes of the Fed's October 29-30 meeting, released in the afternoon. The minutes suggested the central bank could taper its $85-billion-a-month bond buying program even if the jobs data -- the key indicator the Fed is watching -- says jobs are still weak.


The Dow closed down 66 points to 15,901. The S&P 500 fell nearly seven points to 1,781. The Nasdaq dropped 10 points to 3,921.


Traders in the stock market are afraid that tapering means interest rates are headed higher, even if Fed officials insist they aren't. Wednesday, in fact, the 10-year Treasury yield rose to 2.792 percent from 2.712 percent on Tuesday and 2.709 percent on Friday.


The 2.792 percent yield isn't a new high. That came on September 5, when it reached 2.98 percent. But the market's reaction to the Fed minutes displayed the fears clearly. The Dow fell as many as nearly 102 points before stabilizing.


That said, there is still the other question to consider: What about the fact that the Dow and S&P 500 don't seem able to push above 16,000 and 1,800, respectively?


It happens. It happened in February. The Dow closed at 14,009.79 on February 1. It fell back the next day and did not finish above 14,000 again until February 12. It had short stays above 14,000 until February 27, when it surged and set it itself up to close above 15,000.


It's a consolidation phenomenon. You sell winners and buy laggards until they move up. And then the whole market moves.


Unless something else is going on, like a market top.


Market tops start quietly. The indexes reach what looks like a plateau, tread water and then fall. You can see such phenomena in the 2000 top and the 2007 top. The Dow has fallen for two straight days. The S&P 500 and Nasdaq have fallen for three days in a row.


Many many people believe the market is too expensive and close to a bubble if not in a bubble. And a bubble, they say, must pop.


Maybe. Remember: The Fed wants businesses and individuals to invest, arguing that new investments mean new jobs. It doesn't want to upset the recovery. So, we'll see.

Read more from Benzinga

Nov 21, 2013 11:15AM
How about there being zero true growth and the fact the FED has used all it's hole cards.  We are spending close to 2 trillion a year in fake tomorrow dollars and little to nothing to show for it.  We are truly eating our seed corn and if you looked at this economy through your grandfathers eyeglasses you would puke.  This by my methods of calculation show we are but a stick in the mud economically and our yesterday savings and investments habits are truly but a dream or fiction today. Anybody thinking we might see a bright light somewhere down the pike need only look to this ACA disaster to understand how little effectiveness our elected officals are capable of and how they truly do not take any pride in the positions they now hold.  How can the American political institution  subject it's citizens to a completely new and overpowering law so ill concieved and an utterly foolish disaster of implimentation. The answer is they flat out do not care.  Many Americans now revel in other citizens economic demise and seemingly find solice in their fellow citizens misery.  And we worry about the market being able to reach new plateaus?  JMHO
Nov 21, 2013 2:02PM
Just give me a 20 to 30% market correction, and i'll jump back in with my money that's sitting on the sidelines. Else, let the DOW market go to 18,000. and then crash to 12,000. Either way, yes i'll get back in but after the market correction- mini-crash.
Nov 21, 2013 1:12PM
Why yesterday's aberration? Like we said yesterday morning, its not what the Fed says, its how these people want to interpret his comments....A good chance for some side line folks to get in....Now, this morning we are up close to triple digits but, be careful, you've seen what happened the last couple of days at about 1500 hrs or so and better believe that these manipulators haven't gone anywhere....Remain cautiously optimistic but do not take anything for granted, not when we have so many of these scumbags on and off the floor....More a bit later.
Nov 21, 2013 12:32PM
Closing above 16,000 requires too many stocks to be overpriced at this time.
Nov 21, 2013 1:34PM
Because most people know it's all fake and the collapse is coming as soon as the fed confirms the tapering.

Listen to idiots like ex-repub oops I mean brent at your own peril.
Nov 21, 2013 2:29PM

How true ex-CEO, how true.

Did anyone notice the "first wave of selling @ 12:45" took us down about 5 points and then we bounced back to 92 pts. up...??

Nov 21, 2013 3:27PM

Havay....I'm gonna stick with my 16,500 by year's end on the DOW...It's only a number anyway.

I agree with you about the DOW and stocks being high...

But there are some issues or components that may have a little room to run yet...Some are:

IBM, Intel, Coke, Microsoft, JPMorgan, Pfizer or Merck.

Home Depot has been re-priced to $85-90 on analytic projections..

GE might go to $30 bucks...?

And I think American Express has some more life in her...We will see with VISA and MC.? 

Nov 21, 2013 2:20PM
Great article, Charlie. IMO we've reached the top for this year . A dip or correction, whatever you call it, is in store for 2014 and present another buying oppty. Whatever the final close for 2013 , it will be tolerable considering the overall gains for the year that most investors realized. Bubbles are for bubbleheads with no foresight or balls. and Losers envious of the success of others.
Nov 21, 2013 2:41PM

I'm kind of surprised we are up close to a hundred points....

Since nothing has really changed from yesterday, although we got kicked a little hard 24 hours ago.

The FED is still keeping the same stance on QE3 and Tapering probably won't really start until after about 2-3 meetings and into 2014...Most analysts are admitting that now.

Europe is doing what the Eurozone has been doing right along; And Asia is waiting for a nice Christmas season here..

Target (TGT) didn't hit the numbers real well YTY or QTQ, they are getting beat down some and probably effecting Retail along the way...?

I told or mumbled something to Miss Lilly last night about dropping some Target positions, because of what I read yesterday afternoon...Oh well, sometimes we are just dumbazzes..

Nov 21, 2013 2:21PM
MM2...Don't really think you will see a 33% correction or crash...And that wouldn't be a mini-crash.
Nov 21, 2013 2:03PM
At 1245 hrs they called for the first wave of selling  of the day so we are inching lower....Nothing to panic about yet but manipulators started to confirm their presence.....Remain hopefully optimistic, unfortunately still three long hours to go, or maybe....Fortunately...We shall see...More later.
Nov 21, 2013 4:19PM

Yes those are "great stocks" for growth Brent, I'm sorry I missed Visa on the IPO and then again in 2008/09, when I believe it dropped back to, or near the IPO price of about $45...

You all have a nice day Markets are taking care of themselves, us manipulators are winning..

I have to go buy a new furnace....


Nov 21, 2013 3:06PM

Rome....A lot of issues/stocks were beaten down 3-4% yesterday, because of confusion on FED remarks and analytical projections....Doesn't matter what the DOW really did, but "does have effect."

When the stocks opened this morning, some might have been pre-market trades, those same stocks were already up at least 1%...

A lot of "traders" don't want to miss that possible 4-5% swing and there are probably a "lot more buy orders" out on the Exchanges....Then sell orders.

I would or could verify that through my Trading House, but really don't have the time...

And others might know about volumes or you could check that on issues.

Nov 21, 2013 5:16PM
Ahh, traders finally showed some guts ... next stop 16500 ... we can do it...
Nov 21, 2013 3:17PM

Someone: Apparently you don`t know a quality stock from a crappy stock.My stocks are so

good that even clowns like Bush couldn`t crash them when the overall market was down 37%

during the 8 years he pretended to be President.

Nov 21, 2013 11:38AM
Because traders largely have become too greedy .... and have lost their nerve.
Nov 21, 2013 3:41PM
RE-tog;My thinking right now is that I`d never sell Visa or MasterCard.They`re both SLAM DUNKS.
Nov 21, 2013 12:44PM

Brent the time to be buying that "dip" was late yesterday afternoon or "after hours" last night...

Some issues that dropped 2-4% yesterday before the close, were already up 1% on the open.

But yes there are some so-called good deals on the Markets if a person was trying to build a position in decent companies...Albeit, many are still pricey or near 52 week highs.

Nov 21, 2013 12:27PM

Those "plateaus" are psychological levels in one's or many minds...

Mostly because they are "new historic" highs..

16,000pts. is only measured on the DOW's, 30 components, which have been changing over the years.

(usually) to reflect the overall Market place, or Companies that are somewhat stable..

GE is the only original issue still on the Index...Although AT&T (T) was one of the earlys, it left the index for a period of time and came back as a different type Company.

1,800pts. on the S&P 500, is probably more impressive to most of us, because of the width and breadth of the overall Markets and the Companies it tracks, similar to the Wilshire or (Total DOW.)

The Nasdaq in it's range now is not yet to it's historic highs, mostly because of being heavily laden with Tech stocks or the Sector...It's highs I believe were during Clinton's Administration and involved the Tech or Dot Com bubbles and blast.

And yes the FED and earnings reports/guidance as of late have been getting in the way of reaching and holding those "new highs."....Any reason possible to take profits on some hi-flyers. 

Nov 21, 2013 11:40AM
Hello, Charley B. nice to see you are still around...
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