Dow keeps smacking into an invisible ceiling

NEW YORK -- The robust stock market rally that began in early March has bumped into an imaginary ceiling that is — at least so far — blocking the path to even higher prices.

Like a sports team that suddenly loses momentum after a long winning streak or a teen that stops growing after a summer-long growth spurt, stocks seem to have lost their mojo.

Take the Dow Jones industrial average. Since June 1, it has been flirting virtually every day with climbing into positive territory for the year, only to be turned back by what Sam Stovall, chief investment strategist at Standard & Poor's, refers to as an "invisible line" in the stock charts. In four of the last five trading days the Dow has come within 13 points of closing higher for the year.

Pros who analyze stock charts call this type of trading action, which keeps a lid on prices and frustrates investors, "overhead resistance." The Dow at 8771 is roughly 5 points from where it ended 2008.

"Resistance levels," Stovall says, "are like rusty doors that take several attempts before they finally swing open. It's hard to break through a ceiling unless you have a lot of strength."

For now, the door to higher prices seems to be jammed. The big gains that came early when investors concluded that a second Great Depression was not imminent have given way to a market that is trading sideways or inching higher at best.

Buyers are more cautious now that stocks are no longer dirt cheap, the economic recovery is choppy at best, and interest rates are on the rise.

"Nobody seems to want to commit that next dollar," says Chris Johnson, strategist at Johnson Research Group. That's due to the psychology of these resistance levels. Merrill Lynch says the Dow's first line of resistance is in the 8900 to 9100 range. MF Global Research says 8830 to 8900.

Why is it so hard for stocks to break above these ceilings? When gauges like the Dow hit round numbers like 9000 or finally climb into the black for the year, investors tend to view it as a possible exit point. "Many investors say, 'If I can get out with even money, I will do it,' " Johnson says. Big investors may simply want to take profits when key levels are hit.