DOW Friday closing price - 13029

The DOW generated a green weekly close making last week's close at 12849 into a successful retest of the breakout above last year's high weekly close at 12810. From a purely chart point of view, the successful retest of the breakout high suggests that further upside should be seen and that the recent high weekly close at 13232 should be broken and a new 53-month weekly made. In addition, the earnings reports have been mostly positive and the economic reports not negative enough to generate aggressive selling meaning that fundamentally the U.S. market should head higher.

On a negative note, though, the fundamental situation in Europe continues to deteriorate and the worldwide economic outlook is not positive causing the traders to have doubts regarding the U.S. market being able to rally "alone". It should also be mentioned that the seasonal outlook is for lower prices during the summer months ("sell in May and go away") and that also is in the minds of the traders, keeping them from being aggressive as well. With these thoughts in mind the outlook for the DOW is mixed and sensitive to news and not to technicals.

On a weekly closing basis, resistance is decent between 13212 and 13232. Above that level, no resistance is found until minor to decent resistance at 13625. On a daily closing basis, resistance is minor to decent at 13115 and strong between 13241 and 13264. On a weekly closing basis, support is decent between 12810 and 12849. Below that level there is no support found until the 12000. On a daily closing basis, support is minor at 12896 and again at 12849 and decent at 12715.

The DOW continues to show a bearish Head and Shoulders formation on the daily chart but last week's rally to 13131 has slightly weakened the formation and raised the downside objective 131 points (from 12113 to 12244) if the neckline at 12710 is broken. Nonetheless, the formation is still viable and will not be negated unless the index is able to rally back up to the mid 13200's. By the same token, the H&S formation had not been built on the weekly chart and now, with the index having gone above the previous week's high at 13057, if the index fails this week and goes below last week's low at 12850, the weekly chart will also show an H&S formation. As such, this past week's rally may still end up being a bearish event if the index fails to rally this coming week.

The DOW did close in the upper half of last week's trading range suggesting that further upside will be seen this coming week. By the same token, the index sold off almost 80 points on Friday to close at the 50-day MA, currently at 13015, and in the demilitarized zone which is considered an important pivot point at this time, suggesting that any kind of news this coming week will determine direction. Most everything this week hinges around news. Many of the more important companies, such as AAPL, report this coming week. In addition, the always important GDP Adv is due out on Friday. Europe will also likely have indicative news this week as the French are having elections on Sunday and the socialist contender is a favorite, meaning that if he wins many of the things accomplished in Europe regarding the debt situation and helping the financial/banking community may change as he is totally anti-business. As such, the traders are anxiously awaiting all this news before deciding in what direction to take the market.

The 13000 level is a pivot point of importance, not only because the demilitarized zone is always important but also because the 50-day MA (an index traders follow religiously) is at that level. Technically speaking, the DOW is presently trading sideways. The index closed above the 50-day MA 3 times this week and below the line twice, signaling that there is no consensus among the traders as to what the news this coming week will be.

Tuesday's high daily close at 13115 is considered resistance and Thursday's low daily close at 12964 is considered support. Whichever one of those gets broken, on a daily closing basis, will likely cause further movement in that direction with 13300 as the upside objective and 12700 as the downside objective. Probabilities are split evenly at the time of this writing.

NASDAQ Friday closing price - 3000

The NASDAQ ended up having an uneventful week with a "vanilla" close at the 3000 level. In addition, the action during the week was totally sideways as well with the index pivoting around 3000 all week long having seen that level on 4 of the 5 trading days without any kind of a move of consequence above or below.

On a negative note, though, the NASDAQ was unable to close the runaway gap generated 2 weeks ago when the index gapped down from 3061 to 3058. The index did see a high this past week at 3059 but the bulls were unable to generate enough additional buying at that price to close the gap, leaving the gap open and the formation still giving the index a bearish probability number.

On a weekly closing basis, decent resistance is found at 3091. Above that level, decent resistance is found at 3204. On a daily closing basis, minor resistance is found at 3042 and minor to perhaps decent resistance is found at 3055. Above that level, decent to perhaps strong resistance is found at 3122. On a weekly closing basis, support is minor to decent at the previous weekly closing high at 2873. On a daily closing basis, support is decent at 2988/2991 and decent again at 2910.

The NASDAQ has built a possible top formation that has not yet been confirmed as a top, given that a strong sell signal has not yet been generated. Nonetheless, all the charts ingredients necessary are in place and it is likely that with all the scheduled news events due out this week that some decision will be made. The index shows a double top with a high on 3/27 at 3134 and a high on 4/3 at 3128 (3122 and 3119 on a daily closing basis). A successful retest of that double top on the daily closing chart was seen a week ago Thursday with a rally up to 3059 and a red close on Friday and a second retest was seen this past week with a rally up again to 3059 and a red close on both Thursday and Friday. In addition, as mentioned above, the index shows a breakaway gap between 3097 and 3086 on 4/4 and a runaway gap between 3061 and 3058 on 4/9. The runaway gap has been tested twice successfully and all the formation needs to be confirmed is a break of Monday's low at 2975 and a daily close below 2988. Such action would also be a strong break of the 50-day MA, currently at 3010, which in turn would also be a strong sell signal.

To the upside, if the bulls can generate a rally in the NASDAQ above 3059 and close the runaway gap, the breakaway gap would likely be closed and the top formation built would be at risk of deteriorating. The index did close near the lows of the week on Friday and probabilities favor further downside this coming week with 2900 as a possible objective. Nonetheless, several important earnings reports for the index, such as AAPL, come out this week as well as the GDP Adv on Friday and it is likely the traders will use those reports to decide which direction to take. Nonetheless, based on the chart alone the bears have a slight edge.

It should be noted that below 2975 there is no support until 2900 is reached and even then that support is minor to decent at best. The chart does suggest that a retest of last year's high at 2887 is likely to occur at some point even within the context of the NASDAQ still being in a major bull-trend. As such, it can also be said that the probabilities favor such a scenario as the index is overbought and at 12-year highs and has not built the kind of support needed to generate further upside of consequence.

The 50-day MA at 3000 is an important line, and even more so since it is at what has to be considered a strong psychological support. It is evident the traders will be putting close attention to what the index does this coming week and taking their cue for the week based on what happens at that level. It is important to note that it is unusual to find a breakaway/runaway gap formation to the downside in a strong uptrend without some major news having come out. The economic news that has come out is not yet confirmed as a major negative and therefore the gap formation is at risk of being negated. By the same token, if the index does break down this coming week and a strong sell signal is given it will be very difficult to negate the chart formation before a retest of last year's high is seen and is successful. As such, Monday's action could be strongly indicative, at least as far as what the index does the rest of the week.

SPX Friday closing price - 1378

The SPX generated what could be considered a successful retest of last year's high weekly close at 1363 with a close the previous week at 1370 and a green close on Friday. By the same token, the bounce seen this past week has to be considered somewhat feeble and not strong enough to convince the technical traders that the downside is over.

The SPX, like the other indexes, will be closely following the economic and earnings reports this coming week. By the same token, it does need to be mentioned that several of the financial companies in the index reported this past week much better earnings than expected and yet that news was not sufficient enough to generate any kind of special rally, suggesting the traders are still strongly worried about the financial situation in Europe.

On a weekly closing basis, resistance is minor to decent at 1408 and decent at 1425. On a daily closing basis, there is minor to decent resistance at 1387/1390 and at 1409/1416 and decent resistance at 1419. On a weekly closing basis, support is minor to decent at 1363/1370. Below that, there is minor support at 1325 and decent to perhaps strong at 1268. On a daily closing basis, support is minor at 1369 and minor to decent at 1358. Below that, there is decent to perhaps strong support between 1268 and 1288.

Though the SPX did generate a green close on Friday the index had an inside week meaning that the positive earnings report news was not sufficient to convince the traders the index is heading higher. In addition, the index closed in the middle of the week's trading range suggesting Friday's close is a pivot point for this week. A move below the previous week's low at 1358 would likely generate enough selling to take the index down to the 1300 level, while a rally above the previous week's high at 1397 would likely take the index up to test at least the recent high at 1422 and even perhaps the high seen in May08 at 1440.

More importantly though, is that any weekly close below 1363 would be give a failure to follow through signal that likely would bring in a strong amount of profit liquidation and new technical selling. Having closed on Friday at 1378 and closer to 1363 than the high weekly close resistance at 1425, I would say the probabilities favor the downside.

The SPX has been straddling the 50-day MA, currently at 1380, for the past 2 weeks having closed above the line on twice and below the line 6 times, none of which has been done in a convincing manner. Nonetheless, any daily close above the recent high daily close at 1390 or below the most recent low daily close at 1358, would likely generate strong action in that direction.

Like with the other indexes, the SPX will likely generate some kind of decision this coming week after the earnings and economic news are out.

The earning's news continues to be better than expected while the economic news continues to be worse than expected. The traders are therefore in a quandary as to what direction to take. News of consequence is expected to be out this coming week with several of the more important companies in the market reporting earnings. In addition, the always important Durable Goods report is due out on Wednesday and one of the most important of the monthly economic reports is also due out on Friday in the form of GDP Adv. It also needs to be mentioned that by the end of the week over 50% of all earnings reports for the quarter will be out as well as about 75% of the important ones. As such, this coming week the trading does promise to be indicative of what the traders think the next 3-6 months will show. This coming week is also the third week of the month leaving only 1 week left before the "sell in May and go away" mentality comes into play. As such, it behooves the bulls to do what they can this coming week as the seasonal probabilities of success will not favor them again until about September.

The chart of the indexes slightly favors the bulls inasmuch as no strong signal has yet been given that the recent uptrend is over. Nonetheless, fundamentally Europe is on the verge of some of the serious problems coming to a head starting with the French election on Sunday that could bring in a new and very negative factor to the financial problems that exist. As such, traders are simply awaiting "more" news before making any decisions leaving the outlook for this coming week up in the air.

The beginning of the week should see more "vanilla" trading but starting on Wednesday the traders are likely to start making decisions on what they plan to do for the next 6 months and by Friday, when the GDP Adv report comes out, those decisions should be more set in stone.