DOW Friday closing price - 11871

The DOW confirmed last week's break of the resistance level at 11734 with a second close in a row above that level and now has the 12,000 level as a likely objective. Nonetheless, there is a prior low weekly close from Mch08 at 11891 that could have some effect. Prior low weekly closes are usually not considered strong resistance levels but with the index in an overbought condition and the SPX and NASDAQ having shown definite signs that they are ready to correct, the possibilities the previous low resistance will hold up are decent.

It is evident that the big money is now shifting toward the safety of Blue Chip stocks inasmuch as several of the high flying stocks in the NASDAQ showed strong signs this past week that they are not likely to go higher. With traders not yet convinced that the rally is over, the probabilities suggest the traders simply jumped from one set of stocks into another, believing the economy will continue to improve.

On a weekly closing basis, resistance is minor to decent at 11893 and again at 12110. Above that level, there is decent resistance at 12767 and strong resistance at 13058. On a daily closing basis, resistance is minor to decent between 11970 and 12050. On a weekly closing basis, support is very minor at 11221, decent between 11098 and 11101, and decent at the 200-week MA, currently at 10930. On a daily closing basis, support is very minor at 11822, at 11731 and minor to decent at 11637. Additional support is minor at 11555/11565, and again at 11478. Below that level, support is minor between 11362 and 11372, minor at 11114, and minor again at 11036. Strong support is found between 10979 and 11008.

There are no decent to strong resistance levels in the DOW, from previous highs until it gets close to 13000, but there are several minor to decent resistance levels from previous important low daily and weekly closes starting at 11893 and up to 12050, as well as the psychological resistance at 12,000. Having closed on Friday at 11871 and the other indexes having closed in the red for the first time in 8 weeks, it can be said that the index may be reaching levels where some profit taking will occur. By the same token, the economic and earnings news continue to be positive and until that changes dips will continue to be bought.

On the other side of the coin, a correction is not only expected but desired at this time because the risk of continuing to purchase the DOW at these high levels where no close-by support has been built is getting to be worrisome, especially when faced with the fact that some of the stronger companies had negative days this week "in spite" of very positive earnings reports.

The DOW has experienced corrections every year for the past 10 years that have started mostly within the first week of January to the first week of February. These corrections occurred even in years where the index was in a strong bull market. In 2006, the index had the smallest correction of the last 10 years with a drop of only 366 points happening over a period of only 2 weeks. Using the fact the index closed at 11871 on Friday, a correction like 2006 would likely cause the index to drop down to the 11500 level, which would be a drop of 371 points from Friday's close. Some psychological as well as previous action support is expected to be found at the 11500 level as well.

Most years, though, the correction was 1000 points or more and in looking at the weekly chart, previous low support is decent at 10827, which coincides with where the 200-week MA is currently located. Such corrections have generally been seen between February and March in those years where the index was in a bull trend scenario.

The question then is "at what price and when does it all begin?". The answer could be last week's action in the NASDAQ and the SPX where both of these indexes had the first red weekly close in 8 weeks and both had negative action in some of their principal stocks in spite of good earnings reports.

Having closed at 11871 on Friday and near the highs of the week, the DOW could generate some early week strength taking it up about another 130 points intra-day to 12,000, but it is highly unlikely that at this time the index will get much above that strong psychological level, and the probabilities are high that within the next 2 weeks the index will be down to at least the 11500 level the minimum correction expected.

It should be mentioned that this coming week the first GDP Advance number for the first quarter is due out on Friday and it is expected to be substantially higher than last month's number which was 2.6%. The GDP Advance is expected to come out at 3.8% and with such high expectations it would not be surprising to see the number come in lower and the traders be disappointed.

NASDAQ Friday closing price - 2689

The NASDAQ had the first weekly red close of consequence since November 15th suggesting that a top to the rally has been found. Nonetheless, the index went one step farther by closing below the previous decent level of resistance at 2706/2707 that had been broken the previous week and giving a failure to follow through signal as well.

The NASDAQ saw 3 of its main stocks (AMZN, AAPL, and GOOG) have negative weeks in spite of the fact that 2 of those stocks (AAPL and GOOG) had better than expected earnings reports. Such action strongly suggests that the top to this rally has been found and that further upside, above the recent high at 2766, is unlikely to be seen.

On a weekly closing basis, resistance is now decent at 2755. Above that level there is minor resistance at 2781 and major resistance between 2805 and 2810. On a daily closing basis, resistance is minor at 2709, minor again at 2753 and strong at 2765. Above that level there is decent resistance at 2800, and major 2811 and 2825. On a weekly closing basis, support is minor at 2518. Below that, there is minor support at 2445, very minor at 2373, and decent to strong between 2212 and 2239. On a daily closing basis, support is minor at 2652 and minor to decent at 2617. Below that level, support is minor to decent at 2495 and decent to strong between 2460 and 2468.

The NASDAQ seems to have broken its hold as being the leader of the indexes as this past week it was evident that further upside in its main stocks is not likely to occur. Nonetheless, the index was still able to stay above the previous weeks low, so no clear signal that a top has been found was given. By the same token, the index did close near the lows of the last 2 weeks (2686 and 2682) and any drop below those 2 levels this coming week (7 points lower than Friday's close) will be considered a negative signal, as well as confirmation that the index is in a corrective scenario.

It should be mentioned that on the 60-minute chart of the NASDAQ, an ominous cross of the 20 60-minute MA under the 50 60-minute MA occurred on Friday and that is the first time it has happened in over 2 months. The cross is presently at 2727 and that level also shows a previous low of some consequence on the same chart. As such, that level must now be considered resistance.

The key to this coming week, at least as far as what the index will do for the week, is 2682 to the downside at 2727 to the upside. A break of either of those 2 levels suggests further movement in that direction. Probabilities now favor the downside.

SPX Friday closing price - 1283

The SPX generated the first red weekly close since the week of November 22nd making last week's close at 1293 into a successful retest of the minor to decent weekly close resistance from Aug08 at 1298. The index continues to lag all other indexes due to the continued weakness seen in the financial industry, shown this week in the less than expected earnings reports on C, GS, and BAC.

The SPX has been the only index that has been unable to get above the Aug08 highs, suggesting that much more positive news is needed to be seen in the financial industry before the index can to much higher.

On a weekly closing basis, resistance is minor to decent at 1293 and decent to strong at 1298. Above that level there is minor resistance at 1325 and then nothing of consequence until the 1400 level is reached. On a daily closing basis, resistance is very minor at 1285 and decent at 1295. Above that level, there is decent to strong resistance between 1300 and 1305, very minor at 1325 and then nothing until 1395. On a weekly closing basis, support is minor at the 200-week MA, currently at 1190. Below that level there is no support until the 50-week MA is reached, currently at 1121. On a daily closing basis, support is minor at 1280/1283, minor to decent at 1267 and minor again at 1255. Below that, there is minor support at 1235, very minor at 1223 and decent to perhaps strong between 1178 and 1184.

The SPX was able to get above last week's high at 1293 with a rally up to 1296 but then failed to follow through closing in the middle of the week's range and with a red weekly close. The index seems to be right in the middle between the DOW and the NASDAQ and likely to follow whichever index wins out this coming week. Nonetheless, having received most of the important financial stock earnings reports this past week (which generally leaned toward the bearish side), it is unlikely that any new buying will be seen, pushing the index to make higher highs than what has already been seen.

The SPX does show 8 weeks in a row of higher lows than the previous week so last week's low at 1271 is an important support for this coming week. If broken, there is no support of consequence on the weekly chart until 1200 is reached.

If the DOW is able to pull the index up on its coattails, resistance will be strong starting at 1295 and up to 1313. Getting up to those levels would likely mean the DOW is up slightly above 12,000 and that is an area in that index where selling is likely to be seen. The probabilities of a temporary top having been made already, or the index going slightly above by no more than 18 points from this past week's high, is strong. Probabilities now slightly favor the downside.

The indexes gave mixed signals this past week with the DOW still a raging bull, the SPX a passenger, and the NASDAQ throwing in the towel. Nonetheless, the probabilities do not favor the Blue Chips stocks being strong enough to lead the entire market higher, and therefore it is likely that a top has been seen or will be seen this week in that index.

There are a couple of important economic reports due out this coming week with Durable Goods on Thursday and the always important GDP Advance on Friday. In addition, a large portion of earnings reports are also due out that could give a "general" idea of how strong the market continues to be.

By the same token, having the important high flying stocks turn in negative action this past week, after positive earnings reports came out, has increased the probability that the market in general will see a corrective phase that could start this coming week. On the other side of the hand, there have been no strong negative catalysts uncovered and a correction to relieve the overbought condition is the only thing that is presently expected.