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Dow 9,000 - Not So Meaningful

Posted by Adam Daniele, CNBC Market Analyst

Last Thursday (7/23/2009), the Dow crossed above 9,000 for the first time since November 5, 2008. Despite this apparent milestone, historically, crosses above a round “thousand threshold” do not necessarily translate into continued momentum for the index.

Looking at the preceding 20 times that the Dow crossed above a "thousand threshold" of 8000 or higher for the first time in a 6 month period, we found that the cross over event does not really help or hinder the overall movement of the benchmark in the weeks and month ahead. If anything, there might be a short term lift in the immediate days that follow. In the 20 ocurrences reviewed, the Dow continued to rally 60% of the time in the first week after the cross over but was only up 55% of the time a month later and was up only 50% of the time six months later. On average, the Dow has been up 0.8%, up 0.6% and down 0.2% in the respective 1, 3 and 6 months that followed the cross over.

These numbers are slightly better in an up trending market, with the Dow up on average 0.2% over a 3-month period and up 0.9% over a 6 month period after a cross over. In a down trending market, on the other hand, the Dow has been up on average 1.0% 3 months after crossing above a threshold and down 1.7% 6 months after the the cross over.