DOW Friday closing price - 12554

The DOW was able to negate the previous week's break of the 50-week MA, currently at 12250, with a convincing close above the line on Friday. On Wednesday, the index also negated the break of the 200-day MA (currently at 12275) that occurred a week ago Friday, and then followed that up to 2 subsequent higher closes on Thursday and Friday that suggests the index will be in an up-trend this coming week.

The DOW gave a strong failure to follow through signal the second week in May when the index closed below last year's high weekly close at 12810, suggesting that the 8-month uptrend was broken. It is evident with this past week's action and highest weekly close in 4 weeks that the traders are looking to retest that level to see if the uptrend is indeed broken or whether this recent move down was mostly due to the fears of the Euro collapse and not based on the slowdown in the U.S. economy.

On a weekly closing basis, resistance is minor to decent at 12681, and decent between 12810 and 12849. On a daily closing basis, resistance is minor to decent at 12580, and decent to perhaps strong between 12715 and 12724. On a weekly closing basis, support is very minor at 12369, minor to perhaps decent at 12118, and decent between 11858 and 11934. On a daily closing basis, support is minor at 12369 and decent at 12101.

The DOW was able to shrug off the strong weakness from the previous week and rally to close on the highs of the week suggesting that further upside will be seen this coming week. The rally was mostly based on statements from the powers-that-be in Europe that the debt problems would be addressed over the next 2 weeks and that some solution would be found to prevent Greece from defaulting and leaving the European alliance. In addition, the Chinese unexpectedly lowered their discount rate stating their desire to re-stimulate their slowing economy and the Fed stated they would do what is necessary to prevent further slowdown in the economy. With an oversold condition and near a strong psychological support at 12000, the index turned around strongly and gave notice that for the time being no further downside would be seen, at least not until some of these problems get resolved or finally break down.

From a purely technical perspective, it was always a decent to high probability that last year's high and breakdown area between 12753 and 12876 (12720 to 12810 on a daily/weekly closing basis) would be retested at some point. It is always difficult to turn an uptrend into a downtrend without some major event occurrence or some chart backing/filling/retesting being seen. With the debt problems in Europe being on hold for the next week or two as well as some positive statements having being made, the traders took the opportunity to short-cover and do some short-term buying.

The DOW closed on the highs of the week and though the high seen 2 weeks ago at 12575 did not get broken on Friday, the probabilities are high it will happen on Monday as the index only closed 21 points below that level. Above 12575 there is no intra-week resistance until 12751/12753 is reached. Further resistance is found at 12876 as that was the intra-week high seen 2 months prior to the 12753 being made in July of last year. It should be noted that the 50-day MA is currently at 12800 and the 100-day MA is currently at 12870. Having broken the 200-day MA 1 week ago and having closed 3 days in a row below the line before negating the break, does suggest the 50 or 100 day MA's will be strong enough to stop any further rally. Probabilities favor the 50-day MA stopping the rally as it is the more respected line.

Though the probabilities are now high that the DOW will continue on upward to the 12750/12850 area, the probabilities are just as high that the index will be unable to get above those levels. A successful retest of the previous high and breakdown area would be a strong negative to the index, likely causing the index to break the recent low at 12035 and head lower, probably down to around the 11700 area, all within the next 2-4 weeks.

To the downside, the 12300 level will now be important support. There is no support seen there on the weekly chart but on the daily chart there is a previous low at 12336 and one at 12311, as well as the 200-day MA which is currently at 12990 but moving up and will likely be around the 12310 in 2-3 days. Evidently the 200-day MA will once again be important support as well as pivot point as having closed below the line once before likely means that a second close below the line would be seen more negatively.

The ebb and flow of positive/negative information over the past week and a half had brought confusion to the trader's minds making chart decisions difficult to depend on. Nonetheless, the fundamental picture has somewhat stabilized (cleared up), at least for a week or two, and the probabilities of the DOW trading between 12750/12810 and 12300 for the next week or two are very high. Evidently, if the situation in Europe takes a turn for the better or for the worse, these parameters will lose some value, but for the next 2 weeks those levels are likely to be dependable.

The probabilities favor the DOW showing strength this coming week, at least as far as the weekly close is concerned. The probabilities are very high that the index at some point, and quite possibly next Friday, will close up at the 12810 level that was the high weekly close for last year.

NASDAQ Friday closing price - 2858

The NASDAQ generated a successful test of the 50-week MA, currently at 2747, with a close at that line the previous week and a green close 111 points higher on Friday. In addition, the index had a previous weekly high close of consequence at 2737 that was also tested successfully, preventing a second sell signal from being given on the weekly closing chart.

The NASDAQ has not yet been able to get above last year's intra-week high at 2888 or close above last year's high weekly close at 2873, even though the index has traded intra-week at or above that level for the last 2 weeks. Nonetheless, with the close near the highs of the week and further upside of some consequence expected to be seen in the other indexes, the probabilities favor the index getting above the 2888 level intra-week. By the same token, closing above the 2873 level next Friday is going to be a bit more difficult to accomplish as the bears need to prevent that from occurring or the failure to follow through signal given 4 weeks ago will be negated.

On a weekly closing basis, minor to decent resistance is found 2858 and decent resistance is found at 2873. On a daily closing basis, minor to decent resistance is found at 2858 and decent at 2873. Above that level, resistance is minor at 2910 and at 2961. On a weekly closing basis, support is 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 decent at 2778 and decent at 2747.

The NASDAQ is facing an important week ahead, at least as far as the charts are concerned. The index is still showing a bearish inverted flag formation with important resistance, on both a daily and weekly closing basis, at 2873. In addition, the 2873 level is also last year's high daily and weekly close and if broken and confirmed to the upside will negate the failure to follow through signal given, likely causing the stock to retest the psychological 3000 level. It should also be mentioned that on the daily closing chart the index also shows decent resistance at Friday's closing price at 2858, which makes Monday's close (red or green) possibly indicative of what the index will do the rest of the week.

The probabilities strongly favor the NASDAQ heading higher this coming week. The index made a new 5 month low this past week and broke slightly below the 50-week and 200-day MA's, both around the 2760 level, but did not see any follow through selling. Both of those MA lines are important to traders and having tested them successfully does suggest that the uptrend may still be in effect and that this recent drop could be just "one more" valley/correction within the longer term uptrend. Traders looking exclusively at the chart (leaving fundamental fears aside) will view this coming week as a pivotal week regarding this index and the 2873 level being an important pivot point for the next few weeks.

The NASDAQ did gap up on Wednesday between 2778 and 2796 and if another gap is generated this coming week, especially if it is at or above 2888, the technical traders will come in and buy aggressively knowing that the very minimum objective would be the 3000 level.

To the downside, the 200-day MA, currently at 2775, will be important support. A drop down to that level would effectively negate the possibility of a breakaway/runaway gap formation. Apart from the 200-day MA, the NASDAQ also show a previous low of some consequence at 2774 that will also add strength to that level. Last week's low at 2726 will be of major short-term importance as a break of that level, especially if it is seen this coming week, would not only be a break of the only support of consequence nearby but also a major failure signal.

The chart parameters in the NASDAQ for the week are very clear and based on the close on Friday the probabilities favor the bulls accomplishing their goals. Nonetheless, this is such an important resistance level, much more so than in any of the other indexes that the probabilities on the bull's side have to be considered "slight". The fundamental picture remains in favor of the bears as the outlook for the European crisis is still grim.

SPX Friday closing price - 1325

The SPX bounced strongly this past week from a level of weekly close support between 1258 and 1285 (closed the previous Friday at 1278) that is considered important and indicative of the short-term health of the index. The bounce was of enough strength that additional follow through to the upside is expected to be seen this week, likely generating enough new buying to push the index to rally back up to the weekly closing resistance between 1343 and 1363.

The SPX did have the biggest 1-week trading range since the third week of December and it was a positive reversal week having made a new 5 month low and then rallying to close in the green and near the highs of the week. The big rally suggests that the traders rushed to get out of their short-positions likely meaning that they do not believe the index will be going below last week's low at 1266 anytime soon.

On a weekly closing basis, resistance is decent at 1343/1345 and decent to strong between 1363 and 1370. On a daily closing basis, resistance is minor to perhaps decent at 1332 and decent between 1343 and 1345. Decent to strong resistance is found at 1363 and minor to decent at 1370. On a weekly closing basis, support is minor decent at 1278/1279, and again minor to decent at 1268. Below that level, there is no previous low close support until 1158. On a daily closing basis, support is minor at 1305 and minor to decent at 1295. Decent support is found at 1278.

This past week, the SPX negated the break of an inverted flag formation when the index got above the 1291 level, which was even more indicative as that is where the 200-day MA is currently trading. The negation of the flag formation also suggests the index will rally above the top of the flag at 1334 the same amount it dropped below the bottom of the flag, which is 25 points (1291 to 1266). If that point objective is reached it would put the index up to an important intra-week resistance level between 1356 and 1363.

The SPX does have resistance at the recent high at 1334 but since that level had no previous resistance before, the probabilities are high that the resistance will not hold up. On a daily closing basis, the index does show decent resistance at 1343/1345 which has been somewhat of an important pivot point for the past 18 months having been seen in excess of 8 times as either a high or a low of consequence. Nonetheless, the index did generate a strong high last year at 1370 (1363 on a daily and weekly closing basis), as well as a strong low weekly close at 1370 in April, giving that level the billing of decent to strong resistance and likely objective to this rally.

To the downside, the SPX will find decent support once again at the 200-day MA, currently at 1288. Additional support is found at 1291 from the low previous to the break below the line. As such, the 1288/1291 level will be considered important support this coming week. A break below last week's low at 1266 would likely bring in strong selling though some support is still found at 1258.

Probabilities strongly favor the SPX getting above the recent high at 1334 and getting up to at least 1343/1345 this coming week, if not up to the 1363/1370 level if the fundamental problems in Europe ebb or are placed on hold for a couple of weeks. If the index is unable to get above the recent high at 1334 on Monday, the support at 1291 is likely to be seen first. As such, Monday is likely to be a very short-term (1-2 days) indicative day.

The debt crisis worries in Europe have been put on hold until the third week of June when the G-20 meeting is held and Greek elections occur. Attention this coming week will likely be put on Retail Sales at the beginning of the week and some manufacturing numbers near the end of the week. Inflation numbers will also come out (PPI and CPE) but those are not likely to have much of an impact. The economic reports this week, though of some importance, are not considered "A" kind of reports and are not likely to have catalytic impact though they could help the indexes reach resistance or support levels mentioned above.

The strong bounce up off of important chart levels is likely to generate additional technical rallies up to resistance unless unexpected news comes out. The traders are probably going to be mostly buyers this week at least until the strong resistance levels are reached. Nonetheless, the indexes are still in a short-term downtrend and a mid-term sideways trend and strong rallies up to resistance are likely to be aggressively sold, especially since no "actual" solutions to the problems facing the market have been found.

Monday is important as the probabilities strongly favor follow through to the upside, both on an intra-week basis as well as on a daily closing basis, based on the strong late rally on Friday. By the same token, a red close on Monday, especially in the NASDAQ, could derail the positive mood seen at the end of the week and put some selling pressure on the indexes for the rest of the week, or at least until the economic reports come out.