We can’t blame pundits for trumpeting the approaching 20,000 level on the Dow Jones Industrial Average. After all, such huge round numbers are rarities in the stock market, and readers eat up those headlines. Still, I prefer to look at the charts, make my projections, and then live or die by my work.
Right now, Dow 21,000 looks to be the far more important target.
While there is an argument that round numbers act as support and resistance on the charts, I wouldn’t bet the house on them. Few traders make decisions this way because they know that if everyone looks at a big price level, it’s not going to be that effective.
Why? Because people will jump the gun and trade ahead of them, hoping to get an edge on everyone else. That is why the end-of-year Santa Claus rally now starts in November, the current Trump rally notwithstanding.
Here’s how I get to the 21,000 level, and it starts with a measure of the giant trading range that ended in July (see Chart 1).