DOW Friday closing price - 12880

The traders, facing a fundamentally pivotal week, received positive information from European officials on Friday that caused the DOW to rally strongly and make a new 2-month weekly closing high above 12767, as well as close above last year's weekly closing high at 12810. The positive weekly close above both of those levels suggests that the failure signal that was given in May has been negated and that the possibility of a longer term downtrend has diminished substantially. Confirmation of such a signal will still need to be accomplished next Friday with another close above those levels, but if that happens the possibility of the index being in at least a sideways trend, or a slightly bullish one, will increase.

The DOW closed on the highs of the week and no selling was seen on Friday suggesting further upside will be seen on Monday. Nonetheless, the close above the resistance levels was not completely convincing as it came only at the end of the day and without the kind of buying that would have made a decisive statement. In addition, end-of-the-month book squaring was likely occurring giving an additional reason for the buying to be seen at the end of the day. By the same token, if the news out of Europe regarding the commitment from all the European nations to support the banking industry turns out to be as stated, it does give traders a reason to feel some optimism that was not previously felt.

On a weekly closing basis, resistance is minor at 12982 and then nothing until decent to strong resistance is found between 13212 and 13232. On a daily closing basis, resistance is very minor at 12890, decent at 13005, minor at 13115, and decent to strong between 13252 and 13279. On a weekly closing basis, support is minor at 12640, very minor at 12479 and at 12369. Below that level, minor to perhaps decent support is found at 12118, and decent between 11858 and 11934. On a daily closing basis, support is minor to decent at 12715 and decent at 12502. Below that level, support is minor to decent between 12369 and 12411.

The news that came out on Friday is not a game changer and not likely to stimulate growth in Europe and therefore a mixed-blessing event that will likely prevent "aggressive" buying (or selling) from being seen. The break of weekly close resistance at 12810 shows that the possibility of a downtrend has been prevented, at least for now, but it does not suggest an uptrend has started. The probabilities favor the b>DOW getting into a sideways trend until fundamentals change further.

Based on the fact that the high in the DOW for the past 54 months has been 13338 and that the bounce high from the first major break seen during the last recession in Apr08 was 13132, a sideways trend would likely find strong selling in that area. The same thing can be said about the downside with 11700 to 12000 being seen as support based on the 7 times that area has seen a strong bounce during the past 5 years.

The DOW closed on Friday on a very strong note and more importantly based on a positive fundamental piece of news which suggests that further upside will be seen on Monday. Some intra-week resistance is still found at the high seen 2 weeks ago at 12898 but based on the close on the highs of the week at 12880 (only 18 points below the previous high) it seems highly probable that resistance will be broken at the opening on Monday. Above 12898 there is no resistance whatsoever until the 13000 demilitarized zone is reached. Nonetheless, a 2-week congestion area in the 13000 demilitarized zone was seen the last 2 weeks of February with 13055 as the high seen during that period of time and it is likely that area will stop the rally, at least for a week or two. On a slightly longer term basis (perhaps 3-5 weeks) it is likely the index will move up to at least 13132 or perhaps up to 13338.

As far as support is concerned, the 12700 area now has to be considered decent support, if and when the DOW follows through to the upside this week and the index does not give a failure signal closing below 12700 any day this week and more importantly next Friday for the weekly close. If the index is able to establish itself above 12700 the probabilities will be high the index will trade between 12700 and 13100/13300 until the first 3 weeks of the earnings quarter are over (first week of August). Keep in mind that this chart evaluation is all based on Friday's announcement of financial support for the European banks and if that announcement has any holes not seen on Friday, the rally will be seen as a 1-day phenomena and the sellers will once again be in control.

Monday is an important day for the DOW as the traders will have had time to evaluate Friday's announcement in more detail. Friday's rally might have been influenced by end-of-the-month window dressing as well as a general feeling of relief that European leaders were "getting together" and addressing their bank problems. Nonetheless, no details of the agreement were given on Friday and it is always likely that the agreement will be "less" than what the initial reaction alludes to, especially in the case of the Europeans who have been notorious for making bold statements and not backing them up fully.

It will be difficult for the traders to make intra-day chart decisions easily on Monday as the 60-minute chart of the DOW does not show any support of consequence until 12750 is reached (130 points lower than Friday's close). A drop down to that level would still leave the intra-day chart in a bullish state. In addition, the sideways chart action that the daily and weekly chart suggests is now in place allows the index to drop as low as 12700 without causing any damage to the chart. As such, expect Monday to be an indecisive day with two-way trading (red and green), at least until the end of the day.

By the same token, any rally above the recent high at 12898 will open the door for a rally up to the 13000 demilitarized zone and being so close to 13000 suggests that the traders will be working strongly to reach that objective, and Monday does seem to be the perfect day for that to occur if no negatives are found over the weekend. A high of 12970 or a low of 12750 are both possible for Monday but unlikely that both will be seen unless the index goes down first and finds technical buying at the intra-day support. Simply stated, a rally will keep the bulls buying and the bears on the defensive but a drop first will bring some uncertainty into the minds of the traders, which will in turn need to see technical buying at 12750 to feel confident again.

Where the DOW closes on Monday will likely be indicative, especially if the close is in the red and below 12810.

NASDAQ Friday closing price - 2935

The NASDAQ continued its recent string of positive weekly closes having closed again in the green for the 4th week in a row. The index has led this recent rally but not in an indicative way inasmuch as it has gone up 6.5% compared to the SPX at 6.2% and the DOW at 6%. These numbers do suggest the rally is not industry-led but simply general in nature meaning it is "all based on Europe and nothing else. On the other side of the coin, though, the NASDAQ has a lot of "open chart air" above (contrary to the other indexes) and from a chart basis alone it should be the index the traders will watch for clues as to the validity and staying power of this mini breakout.

On a weekly closing basis, minor resistance is found at 3000, minor to decent at 3069, and decent to strong at 3091. On a daily closing basis, minor to decent resistance is found at 2988. Above that level, decent resistance is found at 3069 and strong at 3122. On a weekly closing basis, support is minor at 2778 and minor to decent at 2747, minor at 2686, minor to decent at 2643 and decent at 2616. On a daily closing basis, support is minor to perhaps decent at 2910, minor but perhaps indicative at 2870, very minor at 2849, and decent at 2836.

All eyes will be on the NASDAQ this week as the index has no previous intra-week resistance until 3085 is reached (5% above Friday's close). With the DOW having intra-week resistance 1.1% above Friday's close and the SPX 1% above, it is evident the traders will key on the NASDAQ to maximize their profits, if and when they are convinced the indexes are heading higher. Even on a daily closing basis, resistance in the NASDAQ is 2% higher where the other indexes find resistance 1% or less higher from Friday's close. This clearly means that if the indexes are following through on Friday's mini breakout that the NASDAQ should lead the way.

To the downside and on an intra-week basis, the 2895/2900 level in theNASDAQ is now very important. The index has seen that intra-week low twice in the last 3 months and both times it was important. In this case it is even more important because it is also where the 50-day MA is currently located (always an important line) as well as where a possible breakaway gap is located (index gapped up from 2855 to 2895 on Friday). Any break of the 2895/2900 support level will be seen as a strong disappointment given the fact the index gapped up on news and not on technicals. Below 2895 no support is found until 2818 and at 2800 where the 200-day MA is located.

The NASDAQ closed on the highs of the week and further upside is expected to be seen on Monday. Should the index gap up again on Monday, especially above the 100-day MA, currently at 2952, the traders will likely buy with strength. By the same token, if the index does not gap up and the 100-day MA is able to stop the rally on the close, some disappointment will be felt.

It is evident the NASDAQ has many "chart keys" for Monday, more so than the other indexes, and that chart traders will likely follow the index's lead.

SPX Friday closing price - 1362

The SPX should have been the leader this past week as the fundamental news that came out of Europe regarding the support of the European nations for their banking industry should have caused the buying to key on this index. That was not the case and that leaves questions unanswered as to the long-term benefit of the actions taken by the European nations. This was further questioned on the charts as the index was the only one that was unable to close above last year's weekly closing high at 1363. As such, the failure to follow through signal that was negated in the other indexes has not yet been negated in the SPX.

The SPX did close on the highs of the week and further upside is expected to be seen this coming week. Nonetheless, last year's intra-week high at 1370 still looms as important intra-week resistance and if unable to get broken on Monday disappointment will be felt. The index could see follow through to the upside on Monday of as much as 8 points and still be in a bearish mode. In that respect, and in conjunction with the NASDAQ, the index will also be key to the market.

On a weekly closing basis, resistance is decent to strong 1363 and minor at 1370. Above that level, resistance is decent to strong at 1403 and strong at 1408. On a daily closing basis, resistance is minor to decent at 1370 and minor at 1374. Above that level, resistance is minor at 1390, decent at 1405 and strong at 1419. On a weekly closing basis, support is minor at 1335 and decent 1278/1279. On a daily closing basis, support is minor at 1358 and minor to decent at 1343. Below that level, minor support is found at 1325 and again between 1305 and 1308.

To the upside, the SPX does not show any intra-week resistance for the "past 12 months" until minor resistance is found at 1378. Additional minor resistance is found at 1386 and slightly stronger at 1392. Based on the spike-type nature of the rally on Friday, as well as on the close on the highs of the day/week, the daily chart suggests the index should continue upward to at least 1392. A 1358 to 1392 trading range (down 5 points to up 30 points) is what the chart says should be seen on Monday. Anything different to that trading range will be reason to question what is happening.

To the downside, the SPX has evident intra-week support at 1357/1358 that includes the 100-day MA, currently at 1359. Further support is found at 1340 from another intra-week low of some consequence as well as the 50-day MA. Below 1340, no support is found until 1309 and down to 1300 where the 200-day MA is currently located.

The SPX has to be considered the fundamental key to the market as the news that came out on Friday directly affects the financial industry and therefore the index should reflect the validity of the news in its trading.

The spike-type action after the news on Friday suggests that further upside of consequence will be seen this coming week. There are still questions that need to be answered that could derail the rally but the probabilities do not suggest that will be the case. If follow through to the upside is seen, especially on a closing basis (both daily and weekly), the chart picture will change from one of selling pressure to one of equality with both bulls and bears lacking an edge with which to dominate (sideways trend). The problems in Europe will continue to dictate trading action in the marketplace for the next few months, if not longer, but with confidence that the European powers are working "together" to solve the issues they will not affect the market the same way that has been seen as of late.

Economic numbers and earnings will now begin to gather the attention of the traders for the next couple of weeks, if no surprises are seen in the details of the European agreement. Important economic reports are due out this week with the ISM Index report coming out at 10:00am on Monday and the always important Jobs report coming out on Friday. In addition, a week from Monday the new earnings quarter starts and the tendency has always been to rally during the first 3 weeks of earnings reports.

It is evident that Monday will be "key" to the trading this week as more will be known about the European agreement and the ISM will give important economic data after it comes out at 10:00am. As such, what the indexes do after the first 30 minutes of trading for the week will likely carry over until Friday's Jobs Report. It should also be noted that Wednesday the market will be closed for the July 4th holiday and after Monday there are not likely to be enough traders to change the direction of the market until Friday's reports. As such, traders are likely to take positions on Monday and keep them until the end of the week.