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The Trick Of DOW 11,000: How The Game Is Played.

|Includes: Alcoa, Inc. (AA), CAT, DIS, KO

DOW 11,000 is closing quickly.  Today is Friday, light volume continues to plague the markets and this makes it a perfect opportunity for the "powers that be" to push the DOW over 11,000.  As of now we are hovering within an jump of that key level.

To understand the reasoning behind DOW 11,000, one must understand the markets over the last year.  As volume has been suppressed, the markets have turned into somewhat of a game by large banks, the U.S. Government and of course the Federal Reserve.  Ben Bernanke has a theory and he is putting it to the test.  Make the U.S. consumer believe a recovery is underway and a recovery will happen.  In other words, fool the public, making them believe there is a recovery of epic proportions and the consumer will go spend, spend, spend.  The spending will in fact create the recovery.

Why does this have anything to do with DOW 11,000?  Often times, you will notice, major levels on the DOW are hit on Friday's.  The understand this theory, think of when most consumers do their shopping.  Yes, the weekend.  To have the consumer spend the most money, key levels on indexes must be breached on Friday's.  By doing this, the news pumps the level, consumers see this and feel more confident in spending money on the weekend.  DOW 11,000 on Friday makes for a beautiful headline.  It is truly a test of the Ben Bernanke theory.  Let's hope it works for all our sakes.  If it fails, we are even worse off than when we started just a few years ago. Trillions in stimulus have been pumped into the system to lift the markets and for that to be in vain would be a shame.

The markets are hovering near their highs at lunch time.  The U.S. Dollar has been hammered keeping the inflatable flotation device, also known as the markets, higher regardless of a downgrade to the debt rating in Greece.  Stocks carrying the markets today are clearly Exxon Mobil Corporation (NYSE:XOM) and Chevron Corporation (NYSE:CVX).  XOM is up 1.50% while CVX is higher by 2.15%.  Monstrous moves from two stocks in the DOW.

Other leaders in the DOW are AT&T Inc. (NYSE:T), up 1.10%, Caterpillar Inc. (NYSE:CAT), up 1.25%, The Coca-Cola Company (NYSE:KO), The Walt Disney Company (NYSE:DIS), up a whopping 3.10%.  These DOW components are lifting the index closer and closer to the infamous 11,000 level.  One small buy program late in the day should send us over that magic number for the big headlines at the close and all weekend long.

On Monday, prepare for earnings to begin.  Alcoa Inc. (NYSE:AA) which is -2.90% on the day is reporting earnings after the close.  They are expected to make $0.12 per share and the whisper number has now been trimmed to just $0.08.  Expectations have been lowered on AA greatly in the last few weeks.  Watch this one closely, to shape trading on Tuesday.

Gareth Soloway
Chief Market Strategist