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Making cents of the DJIA that's now at 2006 levels



By Dian Vujovich

I had to scratch my head and wonder what was really behind S&P’s

I was trying to make some sense of the DJIA’s over 500-point drop at its close on Thursday, August 4, 2011, but that’s pretty much impossible. No one knows for sure if going forward this downward trend will continue, the recent close will turn out to be a mere blip on Wall Street charts, if prices will meander along from this point or soon head upwards.

But no matter what anyone thinks, the fact of the matter is that the market is the market. Period. And while all of the 30 stocks in the DJIA were down at the close yesterday, not all stocks closed the day in the tank: Eight percent of those on the NYSE saw price advances, one percent were unchanged and even though 594 hit new price lows, 62 stocks hit new price highs.

Sticking to that high note, our GDP is growing, perhaps not as much as many would like but it’s growing nonetheless. Also growing are corporate coffers. According to a Navellier report by Gary Anderson, the revenues and earnings of 393—or 78 percent—of reporting S&P 500 companies are up 13 percent over the second quarter of last year.

It’s difficult to imagine how the stock market could totally fall apart when so much of corporate America is making money. Then again, it’s a whacky world we live in when anything can happen and often does.

Yesterday’s close puts us right about back to where the Dow closed on May 12, 2006. On that day, five years ago, the DJIA closed at 11,380.99—about 3 points lower than our yesterday’s close.

So going forward are investors likely to experience a future that’s gone backward in stock prices or not? And the answer is: Only time will tell. And when it does it show us once again that over the long run the stock market’s performance, as represented in a mountain chart, shows a jagged line that trends—and sometimes even skyrockets—upward.


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