Dow Jones Chart – August 7, 2009

I charted the Dow Jones Industrial Average ($DJI) daily prices for the year to date after the markets closed on Friday at 9,370.07.

I still see resistance at the trend line of higher highs, but that line was just kissed again on Friday.  The last couple of times the Dow Jones hit that line it stayed with it for a few days before breaking down from it some.  The slightly down days on Wednesday and Thursday just gave room for a good rally on Friday without breaking the trend line.  By the afternoon, the Dow’s stocks couldn’t keep the index up at the highs of the day and we closed off the intraday highs.

Looking for a possible area of support when the DJIA pulls back (believe it or not, we have to have a down week again eventually) I have to go all the way down to the 8500 range for the best line, but also found another early speed bump not too much lower.  I drew a horizontal line from the January high that could come into play, especially as it coincides with another trend line I drew.  Ignoring the late June and early July lows I see a trend line that could offer support less than 400 points lower than the Dow’s current close.  That would give a dip of around 4% or less before this line of support was back in play.  That might actually be a legitimate area to target to buy in, unless you don’t believe the latest jobs report will mean much for the economy since a portion of the less bad numbers came from those who are falling off the unemployment benefits after being on too long rather than gaining new jobs.

I also drew a short trading channel for the past month with thin lines.  Friday’s intraday range hit both sides.  This little channel is worth watching as a possible early indicator of when we’ll see some lower prices across the markets.  To save some charting for the next few days, we can loosely use the intraday lows from Wednesday and Thursday (9,206.45 and 9,208.80) as good points of reference to see if we break that area.  This is also in line with the 10 day moving average which has acted as support since July 14th.

Volume was below average again on Friday, even with the jobs numbers being released in the morning.  That doesn’t speak well for this rally’s remaining strength.  Williams %R remains overbought, but that hasn’t cracked yet - meaning the rally can continue in the face of overbought conditions for a long time.