Big, Round Numbers Fall; 'Speed Bump' Could Be Next
Investors plowed through another benchmark Friday, taking out 15,000 on the Dow in a move that could set up for a short-term market lull.
Crossing psychological hurdles often has led to sideways trading amid some profit-taking and pulse-checking to see what's next.
It happened in December when the stock market passed 13,000 and traded in a volatile range over the next month.
It happened again in February when the Dow passed through 14,000.
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So it could happen now with the Dow Jones industrial average crossing 15,000 Friday as traders bet that the economy may be able to evade a spring slowdown.
"We have seen this before when it can mean some near-term speed bumps," said Ryan Detrick, senior analyst at Schaeffer's Investment Research. "There can be some type of psychological resistance."
The breaking of round numbers has come with stunning speed over the past six months, and the pattern after the immediate period of indecision was, consequently, sharply higher.
The Standard & Poor's 500 also sailed through its own big number, cruising through 1,600.
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On cue, the market's reaction to breaking the key points Friday was some indecision, though there seems little reason to believe the pattern won't eventually repeat.
"We're in a bull market. It defies every bearish thing out there and keeps going higher, so it kind of is what it is," Detrick said. "This week was an example of how quickly things can happen. It's amazing at the continual bid in this market. Until it shows some signs in cracking, it's a very tough job to beat against it from the bearish point of view."
One key ingredient that has kept the market milestones falling has been aggressive Federal Reserve monetary policy.
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The U.S. central bank is pumping $85 billion a month into the economy through purchases of Treasurys and mortgage-backed securities, and has inflated its balance sheet to $3.3 trillion.
"After passing this round number the market could pause for a second or two," said Michael Cohn, chief market strategist at Atlantis Asset Management. "The fact is that the (Fed) spigot will not be turned off, and the spigot is basically what's driving this market."