Dow Jones Chart – 10 Year Monthly – July 17, 2009

I charted the past 10 years monthly price action for the Dow Jones Industrial Average ($DJI) ending 7/17/09 while the DJIA was closed at 8,743.94.  I went back 10 years to get a better feel for where the chart says we’re heading over a longer period than a 3-6 month chart my forecast.  I still found conflicting indicators.

On the bearish side, the same trend line that used to be the declining support line of lower lows is now acting as a declining trend line of resistance with lower highs touching the line.  The rest of this month could break that for us if this mini-rally has better legs.  The 200 month moving average comes in just at the same spot as that trend line and is adding to resistance.

The bullish side offers some strong counter arguments.  The DJIA moved above its 10 month moving average in June and although it dipped back below it this month, it regained its footing.  The DJIA is still trading below its 100 month moving average, but is still so far below it that one might have to wonder if a reversion to the mean, even slightly, could offer another nudge up.  The technical indicator I find more telling is the Williams %R indicator.  I used the 14, 28 and 56 month periods to see how the varying time periods were reacting.  All three have recently moved above the oversold range, just as they did in 2003 when the last long bull market started. 

I’m not saying that we’re about to start another four or five year bull run, but I might actually be turning more bullish finally.  I’ll expect a few bumps and pull-backs along the way, but the overall chances of the direction moving up seems to be greater than down from this point.  Remember, I’m talking longer term.  If the trend line I mentioned above and the 200 month moving average hold resistance the DJIA should get another pull-back and we’ll have a better opportunity to buy in lower.