Even though the S&P 500 index is the most important of the major indices to watch, the Dow Industrials still warrants an in depth technical look from time to time.

DJIA Chart #1

Chart #1 shows the Dow Industrials from January 2007 up to now. Observe that between October 2007 and October 2008 the Dow formed a trading channel (black lines). As the market deteriorated rapidly the trading channel was broken. The lower channel line represents a resistance level.

The blue lines represent trend resistance at this time.  From this chart we can see that the DJIA is up against a resistance point, albeit not a significantly strong one.

Chart #2 shows the same time frame but this time the trend lines have been

DJIA Chart #2

removed and Fibonacci levels have been applied. In this view we can see that there is resistance at the 23% Fib level, this first Fib level is likely to offer some resistance, but the question that can not be answered here is for how long it will hold.

The red box drawn on the right hand side represents the general consensus of price targets for a bear market rally. My analysis keeps any bear rally capped to the lower side of the box (10,000 area). See the trend lines in chart #1 that converge in the lower 10,000 area.

Chart #3 is a daily chart of the previous several months. In this view I

DJIA Chart #3

highlight the price support and resistance levels. As in chart #1 (blue trend line), the DJIA is right at a resistance level (black line). Using the DJIA to gauge the near term market direction reveals that the DOW is entering an increasgingly narrow trading range. 8,600 on the low end and 9,040 on the upper end. If the current resistance levels hold in the short term, then we may see the DJIA retest the 8,600 region. If 9,040 is breached then it is likely that 9,630 will be the next target.

Irrespective of any bear market rally, I remain firm in my assessment that we are in a secular bear market, the end result being a market that goes much lower in the long term.

Don’t confuse brains with a bull market…

…Humphrey Neill (Art of Contrary Thinking, 1895-1977)