ALTHOUGH THE DOW IS TESTING ITS 2000 PEAK, SOME MARKET INDEXES HAVE ALREADY REACHED NEW RECORDS AND SOME AREN'T EVEN CLOSE -- THE DOW FELL THE LEAST AFTER 2000 AND HAS RISEN THE LEAST SINCE 2003
THE TWO OTHER DOW AVERAGES HAVE EXCEEDED THAT HIGH ... Everyone's attention is fixed on the Dow Jones Industrials' challenge of the all-time high reached in January 2000. Which begs the question as to how significant that previous peak has been for the entire market. For a lot of market indexes, it hasn't meant very much. Charts 1 shows the Dow Transports having broken through its 1999 peak a year ago and still remains well above the breakout point. The Dow Utilities in Chart 2 are also trading above their late 2000 peak. Chart 3 shows the Dow Jones Composite Average also trading at record highs. That index contains all 65 Dow stocks -- 30 industrials, 20 transports, and 15 utilities. Those charts would seem to indicate that the 2000 peak hasn't been all that important.

Chart 1

Chart 2

Chart 3
NYSE AND SMALL CAP INDEXES ARE ALSO AT RECORD HIGHS ... The next four charts show a very mixed picture regarding the 2000 peak as well. Charts 4 and 5 show the Russell 2000 Small Cap Index and the NYSE Composite Index trading well above their 2000 highs. Part of the reason for Chart 5 has been the dominance of small cap stocks over large caps since year 2000. Part of the NYSE strength has come from a heavier weighting in basic material and energy stocks. Neither one had any trouble at their 2000 peaks. Chart 6 shows, however, that the S&P 500 is still 215 points (or 16%) below its 2000 high. It appears headed in that direction though. The weakest chart of all belongs to the Nasdaq Composite Index (Chart 7) which remains more than 2500 points (or 100%) from its 2000 high. That means that the Nasdaq would have to double in price from current levels to reach its old peak. That's because it rose the most in the years before 2000 and then fell the most after it.

Chart 4

Chart 5

Chart 6

Chart 7
THE DOW FELL THE LEAST AND HAS RISEN THE LEAST SINCE 2000 ... Chart 8 compares the Dow Industrials (red line) to the Nasdaq Composite Index (brown line) since 1990. Although both indexes usually trend in the same direction (as do most stock indexes) their "relative" performance has shown significant differences. In the decade before 2000, the Nasdaq rose signicantly faster than the Dow. That can be seen in the Dow/Nasdaq ratio which fell throughut the entire 1990s. During the 2000-2002 bear market, the Nasdaq lost 80% while the Dow fell only 38% (the S&P 500 lost 50%). Since the Dow rose the least of the three prior to 2000, and fell the least after that year, it's had much less ground to make up to reach its old high. Although the Dow is the first of the three indexes to reach its old high, it hasn't been the strongest. Since the 2002 bottom, the Dow has risen 62% while the Nasdaq has doubled in price (100%). The S&P has regained 72%. In other words, the Dow has risen the least of the three in the last four years. Which brings us back to our original question as to the major significance of the Dow 2000 level for the entire market. There's no question that the current Dow test holds some significance for the market over the short run. Since it's the only market index that's testing its old high, however, I doubt that its performance speaks for the entire market. Although the market now has to contend with the dangerous month of October, it also has the four-year cycle working in its favor.

Chart 8