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Next stop for the Dow: Back to 1997 levels?

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Yesterday, we were all surprised to see the Dow Jones Industrial Average fall back below 8,000. The Dow finished down 427 points to land at 7,997. In other words, just enough to freak people out at being below 8,000. Everyone noticed that it hadn't been this low since 2003, nearly six years ago. In other words, if have you spent the last six years putting money away in your 401(k), depending on what dividends you got, you may as well have put your money in a money market fund.

We've got about 450 points to go in 2003. The lowest it got that year was 7,524 in March. In the olden days, 450 points on the Dow would seem like an improbable swing, taking weeks or months. Not so in highly volatile 2008. A 450-point-drop would represent about a 5% drop -- a higher percentage loss than it was just a few months ago.

After that, 2002 has a low of 7,286. To get there the Dow would have to fall 711 points or 8.8% from Wednesday's close. Once that happens, though, the floor drops out. I'm not talking about technical support here, just psychological and historical support. See, if the Dow drops below 7,286, then we're heading into 1997 territory. That's the last time the Dow was below 7,286. If it breaches that threshold, we're heading back to October, 1997, when the Dow was at 7,161.

If that happens, it would mean that a lot of the gains of the late 90s have been wiped out. An entire decade lost. It may be just a number and just psychological, but it will certainly bum me out.

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Symbol Lookup
IndexesChangePrice
DJIA-14.2810,318.16
NASDAQ-10.782,146.04
S&P 500-3.521,091.38

Last updated: November 22, 2009: 02:01 PM

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