DOW Friday closing price - 12862

The DOW was able to generate a new 44-month weekly closing high on Friday with a close at 12862, above the previous 12810 level seen in May. The index had a positive classic reversal week with lower lows, higher highs, and a close above the previous week's high suggesting that further upside of some consequence is going to be seen. The index shows no resistance above until 13058 and if follow through is seen on Monday, reaching that level will be highly likely this coming week. Such a close does suggest that the uptrend has returned.

On a negative note, though, the DOW was unable to break the May intra-week high at 12876 even though the high of the day at 12869 was made early in the morning and the index never backed off from those highs very much. This action does show that strong selling continues to be seen at these levels, in spite of the news that came out on Friday regarding the positive trend in unemployment. It is evident that the traders are expecting that the seasonal correction that is usually seen in the first quarter of the year is going to be seen.

On a weekly closing basis, resistance is minor to decent at 13058. Above that level, there is minor resistance at 13695, minor to decent at 13907 and major at 14093. On a daily closing basis, there is no recent nearby resistance as the index is making a new 12-month high. On a weekly closing basis, support is minor at 12217 and minor again at 11934. On a daily closing basis, support is decent at 12632, minor at 12584 and again at 12480. Below that, there is minor to perhaps decent support between 12355 and 12359.

In looking at all the charts (daily, weekly, and monthly) the DOW did accomplish something of consequence on Friday when it closed above the 12810 weekly closing price that had been in place for 9 months and from which a strong correction had occurred that put the index down very close to 20% and at risk of a Double Dip recession occurring. The index "barely" survived that correction but has now put itself in place of resuming the major uptrend that started in Mch09. What is a head scratcher is that most fundamental analysts are in agreement that that the economy is not roaring upward but simply inching along and that the fundamentals do not call for this kind of a resumption of the uptrend for 2012. As such, Fridays move up is somewhat unexplainable unless it was simply a knee-jerk reaction to the positive Jobs Report.

The DOW faces a week that is very important as there are no economic or earnings reports of consequence due out to help or hinder the index. The chart action on Friday "demands" of the bulls that follow through of consequence be seen so that the breakout is confirmed without doubt. Such follow through would require a visit this coming week to the 13000 demilitarized zone between 12970 and 13030. There is some minor to decent previous resistance there that is not really sufficient to prevent further upside in the longer term but sufficient enough that for the short-term a much needed correction could occur that would also fulfill the seasonal tendency for a the index to drop from February to March. As such, the bulls need to continue to move up starting Monday, reach the objective as soon as possible, make the needed statement and then take some profits. That is the perfect scenario from the bulls point of view.

Nonetheless, it needs to be mentioned that the bulls were unsuccessful in accomplishing that feat on Friday even with the help of the very unexpectedly good Jobs report as the highs were made in the first hour of trading and in spite of the fact that the bears did not "step up to the plate" they couldn't take the index higher the rest of the day. The bulls were successful in closing on the highs of the day on Friday, suggesting that with just a small positive hiccup on Monday a new 44-month intra-week high will be made. The fact remains, though, that the bulls did not accomplish their goals on Friday and must wait through an entire weekend where possibly negative news could come out, to see if the break occurs, and that makes for a very fragile situation that won't be resolved until the market opens on Monday.

All the charts suggest the bulls will be successful, in spite of what many chart analysts, including myself, have been predicting. The Jobs report was a big surprise and threw a monkey wrench into chart analysis and now the DOW has the needed chart break to stimulate further upside. Monday is likely to be critical as everything that happened on Friday suggests further upside will be seen immediately. Any failure to do that on Monday will likely bring strong selling, at least from the day and short-term traders. A failure to follow through is the favorite scenario of a trader because the reaction is usually strong and defining. As such, the only level I will mention today in the newsletter is 12876, give or take a couple of points. That price will be the defining price on Monday as the probabilities of it being seen on any other day are low. Resistance will be found at the 13000 demilitarized zone and decent support will be found at 12529.

NASDAQ Friday closing price - 2905

The NASDAQ had an impressive week making a new 11-year high, both on an intra-week and weekly closing basis. The index broke through all the strong weekly close resistance found between 2833 and 2876 and has open space above until the 3000-3200level, which was a decent resistance in the year 2000. What was even more impressive is that the index accomplished this in spite of a bearish report on AMZN this past week, which is considered one of its star companies.

The NASDAQ did the same thing back in May when the index broke above the previous intra-week high at 2861 (went up to 2887) and the very next week after accomplishing that feat the index generated a key reversal which took the index down over 250 points in just 7 weeks. As such, the NASDAQ will need to confirm the breakout this week with another rally as well as a second close next Friday above 2810.

On a weekly closing basis, there is no resistance found over the past 10 years other than the psychological resistance at 3000. From the year 200, there is weekly close resistance at 3204. On a daily closing basis, there is no resistance. On a weekly closing basis, support is minor to decent between 2605 and 2616. On a daily closing basis, support is minor 2873, minor again at 2805 and once again minor at 2763 and at 2737.

The NASDAQ has open air above and momentum that is equally impressive as the index has only had 9 red closes out of the last 32 trading days and the biggest move down from a previous minor high was 50 points, suggesting that traders are buying the smallest dip with open arms. The index continues to be in a major overbought condition but shows no sign that the trend is going to stop. The index is once again "leading the pack", much like it did in 2009/2010, and until that changes the probabilities of any kind of a pullback of consequence are low. Nonetheless, much like in May, this week is pivotal and the bulls have to maintain that moment in spite of the fact that no economic or earnings reports come out this week that could continue to stimulate the traders to buy at these 11 year high prices. The key this week, just like in the DOW, is likely to be Monday as the index cannot afford to slow down and especially generate a close below the previous 11-year high daily close at 2873, which is only down 32 points from Friday's close. The 2873 level, on a daily and weekly closing basis, is the level that will determine whether the index will get up to the 3000 level and confirm this impressive breakout, or whether it will fizzle like it did the last time.

To the upside, the NASDAQ has no resistance until 3000 and then only psychologically as there is no resistance found in the last 11 years at that price. In the year 2000, the index did have a "major" intra-week low at 3042 that happened after the index plummeted from its all-time high at 5132. Nonetheless, the weekly closing low of that move was 3204 and therefore that level will have some importance as it was a level that was and probably will be considered an important pivot point this year if the index continues higher. By the same token, the 3204 level is still 300 points higher than Friday's close, meaning that the index could still rally substantially on this move.

There is not a lot more to say about the chart at this time. This week is all about confirmation of the breakout. Support of importance, on a daily closing basis, is 2873 and on an intra-week basis it is last week's low at 2782. If the index goes below 2782 this coming week the disappointment will be tangible. Probabilities favor further upside but the bulls will be trading the index with trepidation and concern and without any possible help fundamentally this coming week it will all depend on how much the traders believe the breakout was for real or not.

SPX Friday closing price - 1345

It can be said the SPX was the sensible index this past week as it held the resistance levels that were supposed to hold. The Jobs report did not do much in assuaging the worries about the problems of default in Europe and therefore the traders did not create the kind of technical predicament that is found in the other 2 indexes. As such, the SPX is likely to be the index "all" traders look at this week to determine whether this was just a false breakout due to the knee-jerk reaction after the Jobs report or whether this is a true breakout that the bulls can build upon.

The SPX closed at a level that has been a major pivot point all year. The index did close higher this past year on a couple of occasions but 1343/1345 has proven to be the level that has determined the true situation, both technically and fundamentally. The 1343/1345 level was a major Fibonnaci number back in February and continued to play a determining factor in April and July when the index got up to and above that level twice, both times to fail the following week. As such, the index having closed at 1345 on Friday means that red or green this coming Friday will determine a lot. The 1345 level has also been an important level on the daily closing chart so Monday's close is likely to give a strong clue to the traders as to how to interpret the rally on Friday.

On a weekly closing basis, resistance is decent at 1343 and strong at 1363. On a daily closing basis, resistance is minor at 1330, decent at 1343/1345, and decent at 1353. Strong resistance is found at 1363. On a weekly closing basis, support is decent at 1268, minor at 1257, and decent again between 1216 and 1219. On a daily closing basis, support is minor to decent at 1305/1306, very minor at 1289 and the nothing until decent support is found between 1249 and 1256.

The SPX, like all the other indexes, did close on the highs of the day/week on Friday and further upside is expected to be seen this week. In addition, the index did have a classic reversal week with lower lows, higher highs and a close above the previous week's high. On an intra-week basis, resistance is found at Friday's closing price, at 1356, and at 1370. Above 1370 no resistance is found until 1440. The charts suggest that the SPX will plow through all the resistance above this week and set its target on 1400+. To the downside the bulls are in a quandary as there is no support until the 1300 level is reached and a drop down to support would be considered a strong negative that would likely stimulate further downside. As such, from a purely chart basis, the bulls are "committed" to taking the index higher on a "boom or bust" basis.

I do believe that in the SPX it is all about a red or green close on Monday, though next Friday's close will also be pivotal.

TThe market received some unexpected good news this past week in the form of a much better than expected Jobs report fueling belief that the economy is rapidly improving, in spite of the less-than-rosy picture the Fed and many analysts have been predicting. The problems in Europe were forgotten this past week as the ardor for higher prices drove the indexes to rally strongly, and in the case of the NASDAQ to new 11-year highs, disregarding indicators and seasonal tendencies that predict a strong correction is overdue.

There is a belief that the rally on Friday was simply a knee-jerk reaction to the news that prevented the bears from "stepping up to the plate" in the fears of being run over by the momentum the indexes have gained in the past 5 weeks (NAZ gone up 23 of the last 32 days). If this is the case, a wake-up call could be seen as early Monday when the lack of economic reports could cause traders to think again about buying at these prices under the knowledge that there is going to be little in the way of news to fuel the rally this coming week. A profit-taking binge could easily be seen by the bulls as the risk is now high and the rewards are likely limited.

By the same token, the bulls are in control and greed abounds and with the charts favoring higher prices if the bears do not "step up to the plate" starting Monday further upside could be seen in a runaway-freight-train fashion. The scenario is like a Pandora's box with lots of questions and few answers, at least at this time (Sunday).