You read it first here – the Dow Jones Index (for that matter, most North American indices and stocks) will be at 52 week highs by November 2009 or sooner!

Am I nuts? The Dow at the time of writing this (April 17, 2009) is around 8,100 and the 52 week high is 13,191. That’s a 63% increase from where we are to a new high. Can a sane man be that bullish? Well, it doesn’t take a sane man to make that kind of a call. It just takes a person who understands what I call the Comparative Delusion. This is my introduction to it and the Dow Jones will be my first subject.

Those of you who have been paying attention may have already noticed something peculiar. Earlier I stated the 52 week high was 13,191 (which is true – look it up for yourself but hurry because it’ll change around May 4) but the Dow peaked at 14,280 before the collapse, right? So what gives? Well, the peak was on October 11, 2007 – more than 52 weeks ago. Can you believe it? We’re already 18 months into this mess.

Because of the Dow’s rapid descent since then, as we move forward in time the 52 week high will fall further and further (refer to the 1 year Dow chart below) because as we move forward a day (or week or month) in time, another day (or week or month) drops off the left side of the chart and is added on the right. In essence, the Dow will be getting closer to its high even if it doesn’t move higher. That’s the magic of Comparative Delusion.


Beginning around May 4, 2009 the 52 week high will drop every few days until around June 26 when it will settle at 11,934 for a little over a month. If at that time the Dow is still at 8100 (assume no progress between now and then) the 52 week high will only be 47% higher (right now it’s 63%). We will have gained on the high without actually gaining anything in absolute terms.

This pattern will continue until around November 6, 2009 when the 52 week high will be around 9,200. In order for the Dow to be at a new 52 week high it only needs to gain about 13.5% from where it is now over the next 6 months – a highly probable scenario in my view. Of course the media will jump all over this around October (if not sooner) as the Dow gets within striking distance of the new high and the Great Bear Market of 2008 will be just a memory. This pattern applies for almost any index or stock. Pick one and try it out for yourself.

Published in: on April 24, 2009 at 3:41 pm  Leave a Comment  

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