Dow Jones Industrial Average Approaches Long-Term Resistance

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Although this observation might be a bit early, it is worth pointing out that the Dow Jones Industrial Average (DJIA) is approaching a test of long-term trend line resistance currently at 16,030 (but rises over time). That level represents a 3.02% gain from Friday’s close. The real question, however, is whether this trend line resistance will be exceeded anytime soon, or prove to be a difficult resistance area instead.

With the DJIA up almost 19% on the year thus far, with a change at the helm of the Federal Reserve system likely in January, with yields on longer dated bonds trending higher and with stubbornly high petroleum prices at the moment, one might argue that the upside in equity prices is limited for the foreseeable future.

On the other hand, signs that economic conditions in Europe may be stabilizing or even improving, with Chinese officials suggesting that 7% growth is the “bottom line” for that nation’s business activity, and with inflation levels in the U.S. below the Fed’s targeted level of 2%, one could also argue that domestic economic growth should continue.

Nevertheless, a decline in top line corporate revenues, the approach of the implementation of “Obama care”, an increase in worries over potential of municipal bankruptcies and the handing of unfunded pension liabilities remain “dark clouds” over the economy and the marketplace.

From a technical point-of-view, trend line resistance currently at 16,030 amid overbought conditions should be a limiting threshold, particularly on the first attempt to breach it. Moreover, the bull market without a 20% correction has lasted 1,598 days, making it the 5th longest bull market in history. In the absence of accelerating earnings, these conditions suggest that a “pause” or even a “correction” could be “in the cards” sometime soon.



The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.



This article appears in: News Headlines , US Markets , Economy , International

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