Dow Jones hesitates at resistance level…

By Sandy Jadeja 12:02 9- Jun -2009

Price action on the Dow Jones is becoming choppy and uncertain as of recent. The one aspect we know for sure is that the index has been edging higher. But there are many concerns amongst the bears.

We have seen a very strong thrust from the March low of 6470. Currently the index has gained a +36% move which now appears to be a “V” formation. Of course all traders would have loved to catch this move but this is hindsight. The argument is that the move up is a pullback against the dominant trend which on the Monthly chart appears bearish.

If this is the case then one would expect that the Dow should be staging a reversal pattern on the lower time frame that being the daily chart. We would then be anticipating a reversal to the downside at key resistance levels.

The current levels to monitor are coming in at 8773 – 8821. Already the initial level has been tested three times and the index is hovering at this level for the past six days. If we are to stall at this level then it would be wise to watch for a breakdown with weakness coming in at the close of the trading sessions.

If the Dow Jones breaks below 8630 then this would suggest that a short term top is possibly in place. The confusion that adds concern is that various technical indicators are providing mixed signals. On the one had we have Relative Strength suggesting the recent rally is still in positive mode where several other indicators point to the index being overbought.

Any move higher is likely to take out the 9088 Swing high which would be a victory for the bulls but it may be that at this level some would consider the index expensive. Smart traders will be waiting on the sidelines looking for a sharp reversal and this may be a better option for the bears.

Sandy Jadeja is Chief Market Strategist for ODL Markets and founder of www.Spreadbettingtowin.com where he teaches low risk trading strategies and money management.