Dow resistance holding on tight
There is a serious resistance line still in play on the daily Dow chart. After the financial industry got the boot from investors, the market has fared pretty well. We’re back in the 12000s and keeping a reasonable trading range but there is just one trendline still in the way of Dow 13000.
If the fundamentals weren’t enough, I’d say the technicals don’t look much better. The economic stimulus package still has many months to take effect and the FED sale of credit has yet to make its way into the hands of the Average Joe. This past week has brought some confidence that an uptrend might be building, at least until it hit’s the dreaded 12700 area.
Each of the last three times the Dow tested 12700 it was instantly sold off. The support/resistance line has been in effect since last August and is still pushing prices even today. It looks like institutions found a bargain in the upper 11000s but are still not ready to hold a position past 12700. The last three touches of 12700 yielded a 200+ point drop shortly after.
There is some hope though. A new support line has emerged that should send the price in a crash course with the 12700 zone. If the Dow made it through 12700, there would be plenty of upside potential, probably as high as 13000 before any major resistance. If we can get a week or two without any completely terrible news, I see no reason why the Dow wont rebound simply based on some bargain bin shopping. Provided any negative economic news, the Dow might go for a short term rebound to 12700.
