DOW Friday closing price - 13306

The DOW generated a strong rally this week on the heels of the European announcement that unlimited short-term Bond buying will be done by the ECB to support the European Banks that are in crisis. The European crisis has been one of the strong reasons that the market has stayed under selling pressure for the past few months and the fact that the ECB has finally addressed the issue with some definitive action was taken as a strong positive by the traders. Nonetheless, the positive aspect of the action is limited as it is not a solution but simply an extension of time so the problem can be better addressed.

The DOW was successful in making a new 57-month weekly closing high on Friday and closing near the highs of the week suggesting that further upside will be seen this coming week. Nonetheless, the intra-week double top at 13330/13338 was not broken on Friday as the Jobs number came in lower than anticipated and the bulls were unable to garner enough new buying to keep the rally that started on Thursday's announcement moving higher. The index did not sell off with the negative Jobs report as traders believe that the continued slow-down in the economy will force the Fed to institute another stimulus package (QE3), to be announced on Thursday when the FOMC rate decision comes out.

On a weekly closing basis, resistance is minor to decent at 13625, decent at 13907 and major at 14093. On a daily closing basis, there is no resistance found for the past 12 months. On a weekly closing basis, support is minor to decent at 13090, minor at 12922, and minor to decent at 12849. On a daily closing basis, support is minor to decent at 13090, minor at 13046/13057, and minor to decent again at 13000. Below that level, minor support is found at 12927, minor to decent at 12878 and again at 12715.

The DOW had been languishing for most of the week around the 13000 level with high probabilities of the level breaking if nothing tangible was announced. Nonetheless, once the announcement was made the traders immediately got on the buy side and generated a 300 point rally in less than 2 days taking the index up to the decent to strong resistance that has held the index down all year at 13300/13338, suggesting that further upside will be seen if the Fed decides to add further stimulus at the FOMC meeting on Wednesday/Thursday.

Friday's 54 point trading range in the DOW was a stark comparison to Thursday's 249 point trading range suggesting that the Jobs report was a "bucket of cold water" and that further positive news will be needed to stimulate new buying. The 13300 level is considered a "general" resistance level as 300 points above and below a major level such as 13000 will always offer automatic opposite trading involvement. The rally on Thursday was impressive but then again the index did not have any previously strong resistance on the charts until 13300 was reached, making the rally more technically oriented rather than fundamentally based. By the same token, the bulls do have a technical edge inasmuch as the DOW spiked up on Thursday and did confirm the spike up with follow through and a second green close on Friday, meaning the burden of proof is on the shoulders of the bears and not the bulls.

The DOW did make a new 57-month daily and weekly closing high on Friday and there is no closing resistance until 13551 on the daily chart and 13625 on the weekly chart are reached, suggesting that if the intra-day high from April at 13338 is broken this coming week that the index could easily move up an additional 200-300 points without encountering any chart selling resistance. It should also be stated that the resistances mentioned above are considered minor to decent at best, meaning that if a new 57-month intra-week high is seen that the technical traders will climb aboard aggressively in spite of the fact that fundamentally such as move is not supported. It should also be mentioned that the traders are "expecting" the Fed to announce further stimulus on Thursday when the FOMC meeting ends, meaning the traders have no compelling reason to sell until after the announcement is made.

To the downside, the bulls do have some potential problems inasmuch as the DOW shows no intra-week support of consequence until the 13000 demilitarized zone is reached. There is some minor support at 13176 and at 13094, but should the bulls fail to take the index higher the first couple of days of the week, the index could give up as much as it gained this past week in just a couple of days.

There are no economic reports of consequence due out until Thursday's FOMC rate decision. Further economic reports of some consequence are due come out on Friday with Retail Sales leading the way. Nonetheless, that means that the first 3 days of the week will be mostly dominated by technical trading suggesting that Monday and Tuesday will be pivotal for the DOW. With such limited action seen on Friday, the probabilities favor the same thing happening on Monday. Nonetheless, should the bulls accomplish on Monday what they failed to do on Friday (make a new 57-month intra-week high) it would suggest that Tuesday and Wednesday the index will move higher toward the 13500 level as the traders await the Fed decision on Thursday. If the traders fail to make a new high on Monday and Friday's low at 13266 is broken, the probabilities favor the index dropping down to the 13176 level and trading sideways until Thursday.

The probabilities slightly favor the DOW moving higher this week but Monday will be technically important, at least as to what the index will do for the following couple of days until new fundamental information is released.

NASDAQ Friday closing price - 3166

The NASDAQ has once again taken the reins of leadership having generated a new 12-year intra-week and weekly closing high on Friday, above the previous high seen in March of last year at 3134. With the DOW still trading below the April highs, the rally in the index has to be considered indicative that the bullish sentiment that has been in place since 2009 has returned.

On a cautious note, though, the intra-week high was only by 5 points and therefore it cannot yet be considered a definitive break as a failure to follow through on Monday would set up a possible double top on that chart. Nonetheless, having closed on the highs of the week the probabilities do favor follow through to the upside on Monday and confirmation that a breakout of consequence has occurred. With no news of consequence expected to come out until Thursday, the probabilities of the NASDAQ generating a strong run to the upside during the next 3 days is high.

On a weekly closing basis, there is no resistance shown on the weekly chart for the last 10 years. On a daily closing basis, there is no resistance shown on the chart for the last year. On a weekly closing basis, support is minor at 2908 and minor to decent at 2778. On a daily closing basis, support is minor at 3048/3053, minor to decent between 2976 and 2991, minor to decent again at 2961, and then decent at 2909.

To do any kind of a chart evaluation on the NASDAQ the weekly closing chart going back 12 years has to be used as the index has not been at these levels since Nov00. It should be mentioned that there is no intra-week resistance until the 3500 level is reached but common sense would dictate that the fundamental picture would not support that kind of a rally at this time, and probably not until "after" the elections. As such, weekly closing prices have to be used to determine possible upside resistance levels. The one level that stands out like a sore thumb, and a level I mentioned repeatedly in April when the index was trading at these levels, is 3205. The 3205 level, on a weekly closing basis, was the first area where the index stopped to generate a decent bounce after the fall that started on Mar06 from the all-time high at 5132 (during the Dot.com rally). Previous low weekly closes are normally not considered to be more than minor to decent resistance but it stands to reason that level will likely stop any rally due to the present fundamental circumstances. If 3205 is the likely upside objective, it means that the index could go up an additional 2% (about 65 points) from Friday's high.

To the downside, the NASDAQ has no support until minor support is found at 3069 and then again at 3040. By the same token, the stock generated a spike rally up on Friday with a gap included between 3082 and 3087 and that means that 3087 must also be considered minor support as the gap should not be closed if the index is to rally up to the 3205 level this week. Simply stated, the bulls need all the technical chart factors going in their favor if they are to accomplish further upside as the fundamental picture does not support this rally at this time.

It should also be mentioned that it can be said the NASDAQ broke out of a hastily-formed bullish flag formation with Thursday's rally and that the objective of that flag is 3250. By the same token, the rule that applies to a bullish flag requires the index to follow through to the upside, each and every day, until the 3250 level is reached. That simply means, no down moves of consequence can be seen during this coming week.

With the chart and fundamental factors not meshing very well, the probabilities of the scenario outlined above are considered somewhat low. Nonetheless, the bulls do have the technical "edge" and if the computers and traders decide to follow this path, there is little the bears can do to stop it.

SPX Friday closing price - 1437

The SPX made a new 57-month weekly closing high, above the previous weekly closing high made on May08 at 1425. The intra-week high from that date at 1440 was not broken on Friday but the index did close on the highs of the week meaning that just another 4 points to the upside is all that is needed to break that resistance and have open chart space above.

The SPX has benefitted the most from the ECB decision to buy short-term Bonds from the beleaguered nations in debt as it does give the financial industry a respite from the fears that an imminent collapse of the financial system in those countries could occur, which in turn would affect the banking industry world-wide. The ECB decision is not a solution but in a market where traders are looking for any reason to buy, it is enough of a positive to generate a rally in the laggard of the indexes.

On a weekly closing basis, resistance is very minor at 1455, minor to perhaps decent at 1504, decent to strong at 1552, and major at 1561. On a daily closing basis, no resistance is found in the last 12 months. On a weekly closing basis, support is very minor at 1354, minor at 1335 and decent 1278/1279. On a daily closing basis, support is minor at 1399/1402, minor but indicative at 1363/1366, minor to decent at 1358, minor to decent again at 1343 and at 1334.

The SPX closed exactly on the highs of the day and the probabilities are very high that the 1440 level will be broken first thing on Monday. Like I mentioned above, there is no intra-week resistance of consequence until 1523 is reached but like the NASDAQ, it is unlikely the index will be able to climb up that level at this time. As such, the traders will likely be looking for a viable short-term objective they can take profits at. The level most likely to be reached is 1461. In Feb07, prior to the rally up to 1576, the index got up to 1461 and then had a 4 week correction dropping down to 1363, which is a very viable support level for a correction at this time as well. Such a scenario would mean that if 1440 is broken this week as anticipated the index will likely move up an additional 1.7% up to 1461 and get into a small corrective phase.

As far as short-term support is concerned, the SPX shows none until the 1406 level is reached. If any weakness is seen this week, that would be the immediate downside objective. Further but minor support is found at 1397 and then nothing until stronger support is reached at 1370.

Based on the reasons for the rally this past week, the SPX is likely to lead the indexes to the upside. The index is still considered to be the laggard and therefore has the most to rally to catch up. Probabilities favor the upside.

The market turned around on a dime this week after Mario Draghi announced the unlimited amount of short-term Bond purchases to be made in Europe. Additionally, the Jobs report on Friday gave additional credence to the idea that the Fed will announce a third Stimulus package next Thursday and the marriage of both of those events fired up the minds of the bulls to buy and for the bears to short-cover.

By the same token, the economic situation in the World and in the U.S. is not healthy and with the very polarizing elections to be seen in less than 60 days, it is highly unlikely that the bulls will stay long for very long. In addition, September is known to be a corrective down month suggesting that whatever rally is seen this week will likely end up being aggressively sold, at least for the short-term.

Nonetheless, there is "nothing" to stop the market from rallying for the first 3.5 days of the week and technically speaking there really is no close-by level above where chart selling will be seen, also suggesting that the bulls will "push" as much as they can for these next few days. Any deviation from this scenario would be a cause of concern, but the probabilities are high that higher prices will be seen this coming week.