The DOW closed above 17,000 for the first time in early July on the back of a strong U.S. jobs report. Sturdy upward momentum has seen the index post a series of fresh all-time highs this year but charts suggest momentum may be set to slow.
A few months ago we suggested the DOW had an upside target of 17,000. This target has been achieved, marking a continuation of an exceptional uptrend but chart analysis suggests this upward momentum may slow and consolidation may develop around the value of the uptrend line.
The strategic trend and the significant feature of the DOW is the up-sloping trading channel defined by three trend lines. The upper trend line is trend-line C; this will provide support for the DOW as it retreats from 17,000.
Trend-line A forms the middle core of the pattern and is the most well-defined trend line. It starts in February 2011, acted as a resistance in July 2011, and again in April and September 2012 before the DOW broke above this level in February 2013. Starting from February 2013 trend-line A has acted as a support level. The general market environment has been bullish with the DOW staying above trend-line A. The breakout above trend-line C in January 2014 was an unsustainable rally.