The Dow Jones Industrial Average closed above 10,000 today for the first time in a year in what some analysts are saying could be a good sign the overall market is recovering from the nearly two-year-old recession.
“This rally is real,” said Clark Smith, a partner at Woodridge Capital in Jackson. “There’s no doubt it’s real.”
The 30-stock index bottomed out last March. On March 6, the index stood at 6,476 when the day’s trading ended. The recent high came in October 2007, two months before most economists believe the recession officially started, ending at 14,198.
“The thing that makes prices go up is more buyers than sellers,” Smith said. “What you’ve found recently is the selling pressure is gone. The people who were going to get out (in the bear market of 2008 and early 2009) sold. They were through selling. If you have fewer sellers and the same amount of buying pressure, it makes prices go up. That buying pressure makes people think the rally is real and that they’re missing out on something. That brings more and more buying pressure. That’s exactly what you’re seeing right now.”
Woodridge took most of its clients’ money out of the market back in the spring when the Dow hovered well below 10,000. Most of that money, Smith said, is back in the market.
“I think this is very sustainable,” he said, “the caveat being that when the trend changes you have to change with it. We monitor the trends every day. The strength of the trends is increasing, and the velocity of the strength of those trends is increasing.”