Are you the type that gets psyched out?
Traders tend to be the type that are often scared by their own shadows, so when stocks cross a psychological level, like 13,000, we cannot help but expect them to panic. Right?
The Dow Jones Industrial Average breached the 13,000 level earlier this morning and almost immediately retraced 20 points. But that was the immediate reaction. An early afternoon rally saw further penetration above 13,000 but found resistance just as fast.
It should also be noted that the record high for the Dow Jones is 14.164. This means at 13,000 we are only 8.2% away from the all-time high.
14,164 was reached in October of 2007, when unemployment was a minimal 7.2 million people or 4.7%. The most recent unemployment rate is 8.3% for January 2012, or about 12.8 million people.
In terms of market PE, the 19x level of October 2007 is higher than the current 14x.
But what does this tell us about psychological levels?
I think it shows that index numbers tell us a part, but not the whole story and while the media will take this story and run with it.
Are you psyched out by 13,000? 14,000? Let us know!
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Zacks Investment Research
