Chart: DOW Daily Closing Values

Some people believe the market will correct to test the DJIA high of 1999/2000 at 11,722 from above. I've indicated it with the dashed green line on this chart.
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You can see from the chart that the dashed green "support line" was resistance in 2006. The DOW rallied from a bear market bottom in 2002 to this resistance line in 2006 then made a significant correction at that line before gathering strength to turn that resistance line into support.

In early 2007, the market tried to test that breakout from above, but did not test all the way back to the dashed green line. It is very close to this now so "big money" may already be waiting for this to hold before committing to the new money to the market.

Of course, on an intraday basis, we've already tested the 2000 high from above
and I've been adding shares here....

How The Stock Market Works

This short explanation was posted today by Jerry S. in our Facebook discussion group "Investing for the Long Term."

Once upon a time in a village, a man appeared and announced to the villagers that he would buy monkeys for $10 each.

The villagers seeing that there were many monkeys around, went out to the forest, and started catching them. The man bought thousands at $10 and as supply started to diminish, the villagers stopped their effort. He further announced that he would now buy at $20. This renewed the efforts of the villagers and they started Catching monkeys again.

Soon the supply diminished even further and people started going back to their farms. The offer increased to $25 each and the supply of monkeys became so little that it was an effort to even see a monkey, let alone catch it!

The man now announced that he would buy monkeys at $50 ! However, since he had to go to the city on some business, his assistant would now buy on behalf of him.

In the absence of the man, the assistant told the villagers. "Look at all these monkeys in the big cage that the man has collected. I will sell them to you at $35 and when the man returns from the city, you can sell them to him for $50 each."

The villagers rounded up with all their savings and bought all the monkeys.

Then they never saw the man nor his assistant, only monkeys everywhere!

Now you have a better understanding of how the stock market works.

This not only explains the stock market, it explains

• homes and condos built on former cow pastures in Central California
• homes and condos built on reclaimed Florida swampland
• homes and condos built in the Nevada desert close to gambling that destroys rather than creates wealth.

now selling for far less than they were sold but often still above what they cost to build.

"Buy a stock the way you would buy a house. Understand and like it such that you'd be content to own it in the absence of any market. "
--Warren Buffett

Sadly, many home buyers became home speculators and forgot Warren Buffett's sage advice.