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There are two key charting features on the weekly chart of the Dow Jones Industrial Average index. These features suggest that the DOW faces significant resistance barriers which place limits on the upside in this market.
This does not mean the DOW is heading for a trend change. These resistance features place a limit on the speed of the uptrend and the ability of the uptrend to move easily above 13,500. This suggests that the impact of any new round of quantitative easing may be limited.
The dominant feature of the DOW index chart is trend line A. This trend line is a projection of the neckline from the head and shoulder trend reversal pattern that developed between 2011 February and 2011 July.
This neck trend line is projected forward into the future and it has provided a strong resistance feature. During 2012 March the DOW reached this trend line resistance level and then retreated. This suggests trend line A will continue to play an important resistance role in the future.
In recent weeks the DOW has developed a small up sloping trend channel. This is defined by trend line B and C. This channel runs parallel to trend line A. The current DOW index activity is trapped within the trading band and this gives rally and retreat behavior within the environment of a longer term up trend movement.
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