DOW Friday closing price - 12505

The DOW was able to erase all signs of weakness seen in the first 2 weeks of April and generate a new 34-month intra-week and weekly closing high on Friday. In addition, the index had a classic reversal week going below the previous week's low and closing above the previous weeks high and on the highs of the week suggesting that further upside will be seen this coming week.

The DOW has 1 week left in the April rally factor that has been seen the last 4 years with rallies anywhere from a low of 303 points up to a high 660 points above the March highs. With March's high having been 12393, a minimum rally up to 12700 should be seen this coming week if the April factor is repeated.

On a weekly closing basis, resistance is minor to decent between 12726 and 12743. Above that level, resistance is decent to strong between 12986 and 13058. On a daily closing basis, resistance is minor to decent at 12696 and decent at 12743. Above that level, resistance is decent to strong between 12986 and 13058. On a weekly closing basis, support is minor at 12341 and minor to decent at 11893. On a daily closing basis, support is very minor at 12426, minor at 12263 and again at 12197. Below that level there is minor to decent support between 12090 and 12058.

The DOW started the week on a negative note after the positive GS earnings report on Tuesday failed to generate a rally, causing the index to fall below the previous week's low and in the process breaking the 50-day MA. Nonetheless, that same afternoon the reports on INTC and IBM were substantially better than anticipated and the bulls used them to turn the index around on Wednesday to post a strong rally that carried through to the end of the week.

The DOW ended up having a positive reversal week and closing on the highs of the week on Friday, suggesting that follow through to the upside is likely. With no reports of consequence due out on Monday there is little to stop the bulls from pushing higher at the beginning of the week. Already in Asia on Friday the DOW closed up 38 points from Friday's close giving notice that buying continues to be seen.

A couple of weeks ago I mentioned an upward trend-line that has been in existence since January 2009 that has been connecting highs during this rally. That trend-line is presently right around the 12700 level but moving higher about 50 points per week. In addition, from January/February 2008, the DOW does show some decent intra-week high resistances between 12767 and 12756 (12743 and 12696 on a weekly closing basis) that should stop the rally, at least this coming week. Having closed at 12505, if there is follow-through on Monday, another 200 to 250 points to the upside should be seen at some point during the week.

It should be noted that the strong resistance in the DOW is actually not at the mid 12750's but at 13000. With the April rally the past 4 years being anywhere from 303 to as much as 660 points, there is a chance the index could get up to that level next week. Nonetheless, the fundamental picture does not suggest that a rally up to that level could occur. As such, the mid 12750's remains the likely upside objective.

One thing that should be noted is that there is an old adage that states "Sell in May and go away" -- 'historically', investors have done better by selling their stocks in May and buying them back in November. In other words, the months from May through October are supposedly a 'bad' time to be in the market. Ned Davis Research is alleged to have said that their research indicates the optimal 'bad' period (based on history) lasts from the sixth trading day of June to the fifth to last trading day of October. As such, this week's rally could end up being the last rally for the next few months.

To the downside, support should be found this week between 12283 and 12333. Having had a 412 point trading range this past week, if the high of the week is anywhere from 12756 to 12767, it could mean the low of the week could be 12344 to 12355. Volatility seems to be back so drops down to that level are certainly possible, especially since earnings report quarters do bring volatility as important earnings are reported.

It should also be noted that next Friday is the end of the month and the monthly chart is likely to come into play. The monthly closing chart does show some minor resistance at 12621 and minor to decent resistance at 12820.

Important economic reports will be in play this week with Durable Goods on Tuesday and GDP Adv on Thursday. In addition, AMZN, NFLX and MSFT will also be reporting this week. The indexes will likely continue to pivot around these reports but it is important to note that the economic reports have not been coming out as rosy as the earnings reports and that could be a negative factor this week, especially toward the end of the week when GDP Adv is due to come out and being anticipated to be quite a bit lower than last months.

It is evident that earnings are the "only" thing driving the DOW up as the economy and worlds events continue to be negative. Oil prices hover around $110, inflation around the world continues to increase, the dollar is still weak, Middle East problems are unresolved and the U.S debt still grows. This coming week is the 3rd week of the earnings period and most of the important earnings reports will be out, leaving the bulls with less ammunition to use after this coming week. In addition, next quarter earnings are by nature lower. With the "adage" period coming into view, the possibilities are high that strong selling will start coming in after this coming week is over.

It should be noted that the upside objectives mentioned should be seen this week in the DOW based on the April rally factor, but the April rally factor is not important on a weekly closing basis, as such, it is possible to see a rally at the beginning of the week and a drop at the end of the week, pointing to the beginning of the May-October historic sell period.

One last thing, the monthly closing chart does show some important monthly low closes from 2007/2008 at 12268/12262. Low closes are never as important resistances as high closes are but on occasions they are important, especially in cases where they are "bookends" to the all-time high rally up to 14198. As such, in this case they could mean something special, suggesting that if the DOW sells off at the end of the week and closes at that level, the 3-year rally may truly be at an end, at least as far as the May-Oct sell off period is concerned.

NASDAQ Friday closing price - 2820

The NASDAQ was the strong index this past week rallying over 2% in comparison with the 1+% in the other 2 indexes. The index did fail to close the bearish breakaway gap at 2823 but did close on the highs of the week at 2820, suggesting the gap will be closed early Monday morning. The 11-year weekly high close at 2833, as well as the 11-year intra-week high at 2861 will be in the crosshairs of the bulls this week and if the DOW rallies as expected (up to the 12750 area) the index would likely be seeing 2861.

If the gap in the NASDAQ is closed this week (likely) and the bulls are able to get the index above 2861, especially if able to close the index above the 1999 weekly closing highs between 2864 and 2887, all the possible negative factors would be erased and technical buying of consequence could be seen. As such, the bears have more at stake in the NASDAQ than in any of the other indexes, especially since above 2887, based on a weekly closing basis, there is no resistance of consequence until the 3205 level is reached.

On a weekly closing basis, resistance is 2833. Above that level, there is some minor to decent resistance between 2864 and 2887, and then nothing until minor resistance at 3205. On a daily closing basis, resistance is minor at 2782, decent to strong at 2798 and strong at 2833. On a weekly closing basis, support is minor to decent at 2686 and decent 2643. Below that there is now support until the low 2500's are reached. On a daily closing basis, support is minor to decent between 2722 and 2745, minor to decent again at 2686 and decent at 2616.

The NASDAQ, with the 2820 close on Friday, erased the failure to follow through signal it had given previously when it closed above 2810 (closed at 2833) and then proceeded to close lower than 2810 for the following 9 weeks. The close at 2820 strongly suggests the 2833 level will be taken out this coming Friday and a new 11-year high weekly close will be made. Weekly close resistance from 1999 will be found between 2864 and 2887, but it is 12-year old resistance and possibly not respected. The index does has an intra-week high from October 2007 at 2861 that is in play and would be used in conjunction with the 1999 weekly closing highs, but it certainly can't be considered a very strong resistance level.

The NASDAQ did get a worse than expected earnings report on GOOG the previous week, and the AAPL report was not as bullish as the consensus beat of 25% the stock generally shows (beat only by 18%). As such, from that point of view the index does not have the earnings support it could have had if the reports had been better. The index does get additional earnings reports of consequence this week when NFLX and AMZN report on Monday and Tuesday respectively. As such, if those reports are also not overwhelmingly good, it is possible that the positive technical aspects of this past week's action will be reduced, causing the index to fail at 2861. Nonetheless, the bears failed to capitalize on the negative technicals seen over the past 9 weeks and now find themselves with their backs against the wall.

The NASDAQ did generate a breakaway/runaway gap this past week with a gap on Thursday between 2746 and 2785 and on Friday between 2803 and 2809. The breakaway/runaway gap formation, in conjunction with the weekly close above 2810 has put the bulls in a committed situation where they will need to take out at least the February high at 2841 this coming week. Any failure to do that, especially if it includes closure of the runaway gap with a drop back down to 2803 would once again generate a failure to follow through signal that would likely be stronger than the first, putting the index under strong selling pressure.

Support is likely to be decent as well as important at 2809/2810, if broken drops down to close the breakaway gap at 2746 would likely occur. Such a drop would likely take the index down to the now very important support at 2705/2717.

The earnings reports on NFLX/AMZN on Monday and Tuesday could set the stage for what the index does this week. Probabilities favor the NASDAQ moving up to the 2861 level this week waiting for the GDP Adv report on Thursday.

SPX Friday closing price - 1337

The SPX was able to close above the early March daily and weekly closing highs but continues to drag behind the other indexes as the financial industry remains under fundamental pressure. Positive earnings reports in JPM, MS, and GS failed to generate rallies of consequence with both JPM and GS closing lower after the reports and MS only slightly higher. The index did close on the highs of the week which suggest that further upside will be seen this coming week.

The Fibonacci 75% retracement at 1343/1344 continues to be a major obstacle but if the rest of the indexes rally as expected this coming week, the SPX will take that yolk off of its neck and perhaps catch up to the rest of the indexes in a dramatic fashion. Having closed on Friday only 7 points below the Fibonacci number, the probabilities favor that the strong negative will be removed.

On a weekly closing basis, resistance is decent to strong at 1343. Above that level, minor to decent resistance is found at 1395 and strong resistance is found at 1425. On a daily closing basis, resistance is strong at 1343. On a weekly closing basis, support is minor at 1328, decent between 1276 and 1279, minor at 1236 and decent at the 200-week MA, currently at 1190. On a daily closing basis, support is minor at 1314, decent at 1305/1306, minor to decent again at 1298/1300. Below that level, minor to decent support is found at1276, and decent to strong at 1256.

The SPX continues to drag below the other indexes but if able to get above the 1343/'1344 level there is a good possibility the index will lead the indexes for the next week or two, and perhaps for the rest of the year, to the upside. Certainly the financial industry has been the "low man on the totem pole" for quite some time and financial stocks can be considered cheap in comparison with what the rest of the market has done in the last 3 years. As such, if the rally is to continue for the rest of the year, it is possible that the buying will shift toward financial stocks if only because they are the only cheap stocks around.

There is simply no resistance above 1344 until 1395 is reached. Even then the strong resistance is not found until 1425. As such, a rally above 1344 could give the SPX an additional 6% boost, whereas the DOW would only see a 4% boost up to its strong resistance level.

As far as support is concerned, the 1305/1306 level, on a daily closing basis, has become an important pivot point as well as support. With the rally seen on Friday, closing above the most recent daily closing high at 1335, the bulls are committed to taking the SPX higher this week. Any close below 1305 would destroy the support they absolutely need to hold in order to go higher.

Probabilities do favor the upside, but the 1343/1344 level will be a tough obstacle to break.

The bulls, after 4-5 weeks of keeping the up-trend alive and well and without technical breaks of support, ended up getting the earnings news they have been counting on to keep the rally going higher. They do need further help this week, though, at least in the form of "no negative" earnings reports, to confirm what they accomplished last week.

By the same token, this coming week is the last week in April and May has been known as the beginning of a general 6-month drop in the indexes "Sell in May and go away". Nonetheless, for the longer term aspect of the market, it is important for the bulls to accomplish getting the foundation right so at the end of October, after a decent "correction" is seen, they can resume the uptrend seeking to make new all-time highs. The foundation would likely be obtained with a rally in the DOW to 12750/13000 and in the SPX to 1400/1425, followed with a 10-15% correction back down. Such a scenario would not cause any major long-term support levels to break, keeping the longer term up-trend intact. That is the goal of the bulls.

Keep in mind that if the 75% Fibonacci retracement number now currently alive in the SPX is not negated, it would mean the market is still in a long-term downtrend with the 2009 lows as a viable objective. As such, it behooves the bulls to make a statement this week that would continue to be true 6 months down the line, preventing such a bearish scenario. That is what this week is likely all about. With several important earnings and economic reports due out, the "overall" picture of the market is in play this week.