Dow 10,000: What's next?

The Dow Jones Industrial Average ($INDU) has reclaimed the psychologically important 10,000 level. So is this the first leg of a new bull market? Should we expect the Dow to continue rising, perhaps to its old high above 14,000? Or maybe there will be a sharp snapback that will send the market spiraling down to its March lows of 6,547.

History suggests three basic possibilities (see accompanying chart).

1. A return to a Bull market, similar to the 1990s market after the 1991 recession.

2. A Bear market rally which fizzles out, retesting the recent low and then rising and falling in range-bound trading for years, similar to the 1970s.

3. A Bear market rally which runs out of steam, leading to new lows, akin to the sharp rallies in the early 1930s which led to new lows in the Dow.