The Dow Jones Industrial Average touched a fresh all-time closing high last week, boosted by earnings results and the Federal Reserve's decision to further taper its monthly stimulus program. According to charts, this may be just the beginning.
The index is in a zombie market, but in the best possible way: the uptrend is simply unstoppable. Despite some faltering steps, nothing seems capable of ending its rising trend. While there's currently a pause around resistance near 16,500 this is consistent with the long-term trend behavior.
We start the analysis from the negative perspective by looking for technical indicators which suggest an end to the trend. It's no good pointing to the oscillator-style indicators, all of which show over bought conditions. Simplistic technical analysis suggests that prolonged overbought signals precede a market fall and highlight the potential for a trend change. Unfortunately, in a strongly trending market, oscillator-based indicators will consistently give misleading over-sold signals. Depending on the time period for the oscillator it may take 30 days or more for the strong trend readings to wash out of the calculation and normalize readings from the over bought condition.
The Dow does not show any chart patterns which signal the trend is ending. These patterns include a head-and-shoulder pattern, rounding tops and blow-off tops, or steeples made on high volume. None of these patterns are seen in the Dow and nor is there any evidence they are developing. The only blot on the horizon is the recent resistance near 16,500. This is a feature on the daily chart but is not a confirmed resistance level on the weekly chart.
So let's proceed to the positive perspective. There are two defining trend features on the DOW chart.