Dow Jones Chart ($DJI) – March 27, 2009

The Dow Jones Industrial Average (aka DJIA or $DJI) finally found resistance on its chart this week.  As luck would have it (that’s sarcasm), it just happened to top out around the 8,000 range that was support in October 2008, briefly in November 2008, January 2009 and briefly in February 2009.  The observation that it’s a nice round ”triple 0″ number helps the psychology surrounding it and making it a harder hurdle to get over.

I drew three other trend lines on this chart worth paying attention to in my opinion.  The top one is the nearly six month trend line of lower highs found by the DJIA.  It started back in early October when the DJIA gapped down the day before.  The DJIA bumped up against it twice after that in early November and again at the beginning of this year.  This week’s high was within a couple of hundred points of that descending line giving us another obstacle to deal with around the 8,000 mark.

The other two lines come from March only.  They show the trading channel we’ve been in this month.  These lines paint a more hopeful picture than the first two trend lines I drew.  They show the 20% rise inside the trading channel of higher highs and higher lows of this new “technical bull market”.  As of Friday, the DJIA is closer to the rising trend line of higher highs which means it could find support.  That trend line just happens to come really close to The Dow’s 10 and 20 day moving averages which could offer further support.

Pick your side on this chart.  Both the bulls and the bears can make strong cases.  I want to see 2-3 closes above 8,000 before I’m a real believer that this new bull market (a 20% gain from the lows) is any more than a bear market rally and I’ll probably still have some serious doubts.  20% isn’t much when you consider the losses the DJIA has taken over the past year and a half.  Looking for a new entry point to buy into The Dow I think maybe a 50% retracement of this latest rally might be a good target.  That is somewhere close to 7,235.  We’ll see if we get the chance or if this current trading channel has legs.