The Dow Jones Industrial Average ($DJI) has been extremely bullish over the last two months of trading, rallying 1,200 points during this time. While the index is sitting below short term resistance, price may need to test the year’s high at 11,258 before another significant move is seen.
Short Term
The Dow is sitting right at two-week resistance at 11,155, which indicates we could see a minor pull-back from highs before a breakout occurs. Look for early weakness to begin the day. However, if buying pressure begins to enter the market above 11,100, we could see price test levels above 11,160 sometime during the day.
If a wider retracement occurs, the Dow should continue to remain bullish in the short to medium term unless 11,000 gives way – so watch this level closely.
Long Term
The Dow is sitting right at the monthly R1 resistance level at 11,152, which offers a bit of confluence along with two-week visual resistance. If price cannot rise beyond resistance, we could see a two to three-day retracement back toward 11,000 before another round of strength enters the market.
At this time, the market has rallied sharply from 10,000 and only has about 100 points before testing the year’s high at 11,258. I imagine the market will want to test this level (or put in a new high) before a larger retracement occurs. Therefore, any pull-back to 11,000 could be a nice buying opportunity.
The 10,700 level continues to remain the major fulcrum in the daily timeframe. As long as price remains above this level, continued long term strength should remain intact.
One last thing to keep in mind is the fact that the $DJI continues to rally out of the large triangle pattern that was violated at 10,540 in September. This pattern has a back end of 1,640 points, which means the upside target would be 12,180. Therefore, we could see the Dow continue to push toward this target by the end of the year, or early into next year.
Let’s see how this plays out!
Cheers!
Frank Ochoa
PivotBoss.com
Follow Frank on Twitter: http://twitter.com/PivotBoss
