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Dive In, The Water’s Fine?

Is Dow 10,000 a signal to individual investors that the water is fine? Is Main Street about to dive into this market?

The short answer is yes. Fast Money series producer John Melloy wrote about the phenomenon in his blog “Behind The Money.”

He says, as for the fundamental reason behind (the public’s) gravitation to round numbers, you have to think for a moment what happens around these levels.

The big round number catches the eye of the retail investor who wakes up to it on his or her doorstep (or e-mail box) in the morning. He or she then reasons that stock investing must be back and starts to move money back into equities.

There has been $14.5 billion put into stock mutual funds so far this year, compared to a whopping $254.5 billion put into the safety of bonds, according to Morningstar. With the 'Dow 10,000" headlines and low bond yields, there's a lot of money that could rotate into stocks soon.

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Stock and Bond Inflows
YTD through 9/30/09
Stock Funds - $14.5B
Bond Funds - $254.6B
Source: Morningstar

U.S. ETF Net Inflows
July '09 - $9.0B
Aug. '09 - $7.6B
Sept. '09 - $5.4B
Source: Morningstar

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"It seems to me that individual investors have been scared to death of this market," muses Steve Grasso of Stuart Frankel. "Now that they've seen the market come back they may be willing to take on more risk."

The kicker is that the pros on the Street may sell into the retail flow, writes Melloy.

So we may see an initial push through Dow 10,000 and then a fade as the retail rotation dries up and hedge funds take their gains.



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Trader disclosure: On October 14, 2009, the following stocks and commodities mentioned or intended to be mentioned on CNBC’s Fast Money were owned by the Fast Money traders; Adami Owns (AGU), (BTU), (C), (GS), (INTC), (NUE): Grasso Owns (AAPL), (ABK), (ASTM), (BAC), (C), (COST), (CSCO), (PFE), (PRST), (V), (WMT): Seymour Owns (AAPL), (BAC), (BHP), (EEM), (FXI), (INTC), (TTM), (LVS): Pete Najarian Owns (BX) Calls: Pete Najarian Owns (DELL) Call Spread: Pete Najarian Owns (HOG) Nov. Call, Is Short (HOG) Oct. Calls: Pete Najarian Owns (XLF) Calls: Pete Najarian Owns (YHOO) Call Spread: Pete Najarian Owns (LAZ), (LAZ) Puts: Pete Najarian Owns (C) Calls

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