Best Financial Markets Analysis Article After trading below 9900 intraday Friday, an afternoon rally left the index above the key 10,000 mark heading into this week. The Dow's comeback encouraged the bulls but is Dow 10,000 really something to be excited about? (The index was back below 10,000 early Monday.)

It's almost 11 years since the Dow first closed above the 10,000 level and "the market is not going to be very far from where it is today 10 years from now," says Vitaliy Katsenelson of Investment Management Associates in Denver.

Historically, secular (or long-term) bull markets such as the 1982-2000 rally are followed by prolonged periods of sideways market action, Katsenelson says. That's because valuations become extremely high during the bull runs and it takes a long time for them to compress back to average levels, much less undervalued territory. And the current "range-bound market started from the highest valuation we ever had," he notes.

Going forward, the fund manager says investors should avoid buying index funds that mimic the broad market. Instead, focus on finding true value stocks and become a "buy and sell" investor rather than a "buy and hold" one, says Katsenelson, echoing the theme of his book Active Value Investing.

Vitaliy N. Katsenelson, CFA, is a portfolio manager/director of research at Investment Management Associates in Denver, Colo. He is the author of “Active Value Investing: Making Money in Range-Bound Markets” (Wiley 2007). To receive Vitaliy’s future articles my email, click here.

© 2010 Copyright Vitaliy Katsenelson - All Rights Reserved
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