The Dow Jones Industrial Average peaked in early 2010, and will move lower throughout 2010. It peaked at the 10,700 level when it bumped up against the great bear market down trend line. This down trend has been in place since the stock market peak in 2007, and it has held its authority ever since.
Most investors are so blinded by the thoughts of missing out on the next bull market that they can't see that the 2009 bull market rally has ended. After bottoming in March of 2009, the Dow Jones has risen nearly 65% in just 9 or 10 months. This is certainly not a time to become bullish and begin buying stocks that are back near price levels not seen since the 2007 top. Now that the Dow has rallied back up to this great bear market trend line, the downward trend can continue.
Fundamentally, the recession is far from over and there is a great chance the economy will fall into another great depression. The chart of the Dow Jones mirrors the 1930 chart when the Dow went on to lose 89% after a huge snap back rally similar to that of the 2009 rally. A drop of this magnitude could take the Dow down to the 1,000 upon entering the 2012 calendar year. History just may repeat itself....stay tuned. For now, the economy is still bleak as unemployment hovers near the 10% level, inflation fears are prevalent, and the 10 Year U.S. Treasury Note looks ready to absolutely collapse!
Sure, trend lines can and do often break, but is there any reason for the 2009 rally to continue? Not at all. A break of this bear market trend line would also take prices up near levels not seen since before the banks started to crumble. The banks are in better shape now, but the consumers are still strapped with huge debt loads while 10% of the U.S. population are unable to find jobs. The great bear market trend line will once again hold its authority and send the stock market crashing to lower levels in 2010.