Dow 22,000 and what it means

The Dow Jones Industrial Average is a price weighted index.  So the higher the price of one of it’s components, the higher the weight of that component.  There is a formula for it, but not worth diving into.  The point is that we wrote a quick article last week on how Boeing(BA) was responsible for a huge part of the upward move of that day.  In the end, the DJIA is just average.  The goal is to track 30 stocks that represent a variety of industries that make up our economy.  How they are weighted is based on price not the size of the industry.

So what does Dow 22k mean?  Not a whole lot when you really boil things down.  Is the economy moving in positive territory as a blazing speed?  Are jobs coming back..real jobs, not the BS number that is spouted by politicians? Are medical costs as a percentage of income coming down for once in the past 10 years?

If the economy is not jamming then what is driving us to Dow 22k?

Optimism and expectations of optimism.  Trump hasn’t done much to help our economy and his administration has been a reality tv show where someone gets kicked out and a new one is added.  Maybe Kelly will add some much needed guidance and assistance.  This may lead to further optimism from investors traders.

So what will happen at 22,000.  Mainstream media will call it awesome and traders will give the proverbial golf clap and go on with their day.  In the end, it will become a trading level( after many sessions of being tested above and below) that we will reference.  Back when the Dow hit 10k it became a big deal.  Here we are at 22k and it’s just another number.

I would expect traders to push the bigger weight stocks higher to test the 22k and then potentially a small pullback to then test it again.  It will take some consolidation up here to make a strong move through 22k unless there is some unexpected news…then we are off to Dow 30k!

Look for the test over the next few days!