DOW Friday closing price - 12273

The DOW continued its impressive run with yet another new 32-month weekly closing high. The index has been on a tear as 10 out of the last 11 weeks have been green and the red week was only in the red by 50 points. All previous resistance levels have now been broken and the next resistance level is 494 points higher at 12767 and only considered to be minor to decent at best. With no close-by resistance, there is little to stop the index from continuing higher.

In addition, the momentum seen in the DOW is overwhelming as much of the money that had been on the sidelines after the 2008 crash in the market is now getting involved buying mostly Blue Chip companies as that is where more security in price is perceived to be at these severely overbought conditions.

On a weekly closing basis, resistance is minor to decent at 12743 and strong at 13058. On a daily closing basis, resistance is decent between 12684 and 12743. Above that level, strong resistance is found at 13058. On a weekly closing basis, support is very minor at 11823 and decent between 11098 and 11101. On a daily closing basis, support is minor to decent at 11823, minor at 11731 and minor to decent at 11637. Additional support is minor at 11555/11565, and again at 11478.

Since the low at 6469 was seen in March 2009, the DOW has seen a total of 4 rallies of consequence with the first one going up 2408 points from Mar to Jun09 and showing 12 out of 14 green weekly closes in the process. The subsequent correction was 790 points. The second rally carried the index up a total of 2642 points from Jul09 to Jan10 and showing 17 out of 27 weeks in the green. The subsequent correction was 894 points. The third rally carried the index up 1423 points from Feb to Apr10 showing 10 out of 13 weeks in the green. The subsequent correction to that rally was a drop of 1644 points. The present rally has now gone up a total of 2671 points from Jul10 to present day (Feb11) and has shown 23 out of 32 weeks in the green. Based on these previous rallies and subsequent corrections as well as on the time frames involved, the possibilities of a correction starting this week have increased strongly.

It should be pointed out that the first and third rally were very short term (12-13 weeks) and the second and present rally have both been longer term with the first having been 27 weeks and this one now in the 32nd week. It should also be pointed out that both longer term rallies started in July and finished the following year in the first quarter. Just like what has been seen repeatedly over the past 10 years, first quarter corrections usually start January or February. Last year's rally corrected in January and this one is now in the 3rd week of February. In the last 10 years no correction has started later than the 1st week or March, and that was only one time. As such, this means that the start of the correction is now overdue.

Adding to all of this, it should be noted that this 3-year "bull-trend" did not start with a retest of the lows at 6469 and therefore from a purely technical point of view it can be said it is a short-term bull rally within a "longer-term" bear trend. Having reached the 75% Fibonacci retracement number this past week, if the technicals do tell the true story, no further upside of consequence should be seen.

If that is the case, and also in looking at the rallies mentioned above, each of those 3 corrections seen over the past 3 years began with the DOW closing on the highs of the week and beating the highs of the week the following week by a minimum of 6 to a maximum of 53 points. Taking into consideration that there is a "general" resistance area in the index 300 points above a major even number (12300 in this case), it can be said the DOW, having reached 12285 on Friday, could have seen the high or be within 15 to a maximum of 45 points of the high. If this is true, the DOW should not get above a maximum high of 12315/12330 and should begin a correction this coming week.

It should also be mentioned that the NASDAQ, who has been the leader of the indexes for the last 3 years, has seen a 100% retracement of the recessionary drop having closed on Friday at 2809, which is the same weekly closing high seen back at the height of the previous bull trend (closed in Oct07 at 2810). Any further upside by either of these indexes, suggests the market is in a bigger bull trend than was seen between 2003 and 2007. Such a scenario is unlikely to be true fundamentally as most of the economic numbers being seen at this time do not compare favorably with those back in 2007. On a shorter-term basis, support is found at 12156 and again at last week's low of 12092. A break of last week's low, by at least 10 points, would be a strong sign that a temporary top has been found as nothing like that has happened for the last 11 weeks. This is especially true if the DOW goes above last week's high of 12285 and "then" goes below last week's low, as that would be considered a "key" reversal.

By the same token, based on the incredible momentum, blind belief that things will continue to get better, as well as large amount s of money still sitting on the sidelines waiting to participate, the probabilities continue to favor further upside.

NASDAQ Friday closing price - 2809

The NASDAQ has seen a 100% retracement of the recessionary period closing on Friday at the same high weekly close as seen in October 2007. That close, which was at 2810, was the peak of the previous bull market with started in 2003 and was the highest weekly close seen since December 2000. As such, the index is suggesting that the entire 2008-2010 recessionary period has now been erased and that the economy is back to where it was 3 years ago.

The NASDAQ has enjoyed breakout years in many of its stocks as AAPL, NFLX, and AMZN are at all-time highs. Nonetheless, all those stocks have recently shown some inability, both fundamentally and chart-wise to head substantially higher, thus reducing the possibilities that the index will continue on this torrid pace to the upside.

On a weekly closing basis, resistance is major at 2810. Above that level there is no resistance of consequence until minor resistance is found up at 2900. On a daily closing basis, resistance is major at 2859. On a weekly closing basis, support is minor to decent at 2686, and minor at 2595 and decent between 2505 and 2518. On a daily closing basis, support is minor at 2789, decent between 2686 and 2689, 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 closed on the highs of the week and some follow through to the upside could be seen as the 2007 intra-week high was 2861 and that daily closing high was 2859. As such, further upside of as much as another 51 points could be seen intra-week and still stay within the highs seen in 2007. Nonetheless, on a weekly closing basis, any close above Friday's close next Friday would be considered a breakout that would likely mean a rally up; to the 2900 to 3000 level.

The NASDAQ broke out of a 4-week sideways trend in which the index traded in a range of 90 points between 2769 and 2676. The break above that sideways trading range suggests that a rally of as much as 90 points above the previous high (rally up to 2859) could occur. By the same token, the index does show 4 weekly bottoms in a row down between 2676 and 2686 that also suggest that at some point not too far in the future (2-6 weeks) those will be taken out as well with also an equal amount (90 points) putting a possible drop down to 2584.

The weekly close seen this past week at 2809 has to be considered a major pivot point for the NASDAQ as the possibilities of the index getting back to the 2000 highs at 4000 or even the all-time highs at 5000 would increase strongly if this level is broken. As such, next week's close is probably going to be the most indicative close in a long time.

The NASDAQ does find itself in a very overbought condition and with no supports of consequence near-by, making further upside extremely risky for the bulls.

On a short-term basis, the stock does have support at 2763 and then again at the 20-day MA, currently at 2745. A break of those 2 levels at this time would likely be a strong signal that a temporary top has been found. Probabilities favor further upside intra-week this week but a lower close next Friday.

SPX Friday closing price - 1329

The SPX also made a new 32-month weekly closing high on Friday as well as close above a minor to decent weekly close resistance from 2006 at 1325. The index, like the DOW, shows no resistance areas close-by as the next level where some selling could be expected isn't found until the 1395 to 1425 levels are reached.

Nonetheless, much like the DOW did this past week, the SPX is close to seeing a 75% point retracement of the 3-year drop from 1576 to 666, which is found between 1341 and 1348, depending on whether you are looking intra-week, daily close or weekly close. The question then begs to be asked, just like it is being asked in the DOW as to whether the index is in a long-term bear market which has seen a bear market rally of consequence, or whether the 1576 high seen in 2007 will be the next objective.

On a weekly closing basis, resistance is minor to perhaps decent at 1395 and decent to perhaps strong at 1425. . Above that level there is no resistance of consequence until the 1400 level is reached. On a daily closing basis, resistance is minor at 1380, minor to decent at 1395, and decent to strong at 1425. On a weekly closing basis, support is minor 1276, minor again at 1236 and decent 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 1320, minor again between 1299 and 1304, 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 continues to be the fundamental brake of the market inasmuch as the financial industry was the main culprit of the recessionary period that started 3 years ago and financial companies have been unable to recover and make new highs, like many other stocks in the other indexes have, and are still facing big losses and major drawbacks from that period of time. This suggests that the index cannot be in a bull market yet. In addition, the index has continued to lag behind all the other indexes and has not been the main indicator of the market for the short-term bull-run that started in 2009. As such, reaching the 75% Fibonacci retracement number is more likely to suggest that this retracement is in fact a bear market correction rather than a new bull trend, fundamentally speaking.

The 1348 level is the 75% retracement intra-week, 1341 is on a weekly closing basis, and 1342 on a daily closing basis. Having closed on Friday at 1329, it suggests that the index may only need to go up an additional 12 to 19 points in order to fulfill the requirements.

As far as support is concerned, the SPX shows some minor support at 1311. Nonetheless, the support at 1311 is also last week's low and if broken would not only be a minor sell signal but would be the first lower weekly low in the last 11 weeks. Under the present overbought conditions any lower low than the previous week's low would suggest that a correction has started.

The question this week is simple "is this a long-term bull market or have the past 3 years simply been a long-term bear market correction?" Fundamentally speaking this is certainly a topic that will have completely conflicting opinions among analysts but from a technical and chart point of view the probabilities that this could begin to be defined this week are high. The 75% Fibonacci number that was reached this past week in the DOW and will likely be reached this coming week in the SPX is likely to be the deciding factor regarding this question, at least technically speaking. In addition, the 100% retracement in the NASDAQ suggests that any further upside above the 2007 highs will in effect tag this rally as a bull market.

This is also a week where a lot of economic news will be available as Retail Sales, CPI, PPI, Industrial Production, Capacity Utilization, Philadelphia Fed as well as Housing data are due out. Negative reports have been few but even when seen have generally been ignored and therefore the probabilities favor continued upside movement. Nonetheless, many economic reports are already at 16 year high numbers and unless the market is in a major bull trend, it isn't likely that the reports will continue to come out better or even as expected. As such, with the overbought condition that exist and the resistances mentioned above in play, there is a decent chance this coming week will see a turn around.

There is still some room to the upside for the indexes to rally a bit more this week, especially since they did close at the highs of the week on Friday and follow through should be seen. Nonetheless, any rally above the possible highs mentioned above would likely suggest that the market will continue higher and even get into a more frenzied rush to the upside as the money that has been on the sidelines during the past 3 years would probably come back into the market in droves.