DOW Friday closing price - 13080

The DOW had the first 100+ point weekly close pullback since the second week of December when the index had a drop of 318 points. The small correction of 152 points is a minor drop of just 7.5% after the index had rallied straight up over 2000 points in just 4 months, suggesting that the drop was simply a pause in the rally to get rid of the overbought condition as well as retest the important weekly close resistance area (now support) that was broken the previous week at 13058.

The DOW had an inside week (lower highs and higher lows) than the previous week and though the index did close near the lows of the week and some further downside may be seen this coming week, inside weeks generally suggest that the trend will continue, likely meaning that after a bit more selling is seen at the beginning of the week the buying will come back toward the end of the week and start the next leg up in the trend.

On a weekly closing basis, resistance is minor at 13232, again at 13695, minor to decent at 13907 and major at 14093. On a daily closing basis, resistance is minor to decent at 13252. Above that level, there is no resistance shown in the past 12 months. On a weekly closing basis, support is minor at 12980 and at 12922 and decent at 12801. On a daily closing basis, support is minor at 13046 and again at 13005 and decent at 12759.

The DOW did confirm the break above the 47-month high weekly close at 13058 with a second close above that level on Friday. The bears did have a chance to negate the breakout as the index traded as low as 13001 during the day. Nonetheless, the bears were unsuccessful in getting the index below the strong psychological support at 13000 and were equally unable to keep the index trading near the lows of the day, suggesting that the retest is over and that the up-trend will resume this coming week.

Support in the DOW is found at the 13000 level and on down to the bottom of the demilitarized zone at 12970. Should that level break, the next support of some consequence is the 50-day MA, currently at 12880, which is also the area where the previous high for all of 2011 at 12876 is located. Intra-week drops down to that level are certainly possible, within the realm of a mini correction that is long overdue as well as a retest of last year's high.

The 13058 level is important on a weekly closing basis, but since that close occurred almost 4 years ago it is not as meaningful on a daily closing basis as it is on the weekly chart, suggesting there could be some weakness during the week and late strength at the end of the week. The close near the lows of the week suggests that the index will see itself lower than last week's low at some point during the week opening the possibilities that a drop down to 12970 or as low as 12880 could be seen. By the same token, the trend in the DOW has been so strong, and the required retest of the breakout area done, that further downside may not be seen.

To the upside, the DOW has little resistance. The previous week's close at 13232 (intra-week high at 13289) is a resistance that can be attributed more to an overbought condition as well as to the "general" resistance that is often found 300 points above a major level. Nonetheless, such resistance is minor at best as there is no previous resistance at that level. Above that level, the DOW will find minor to decent resistance at 13695 which is likely to offer a bit more bite to it and could generate another mini correction. Resistance will increase in strength and become major between 13907 and 14093. That resistance is not likely to get broken anytime soon.

The magnetism of the 14000 all-time high area in the DOW is likely to dominate the minds of the traders over the next few weeks, until the "sell in May and go away" mentality comes into play. Nonetheless, May is still 6 weeks away and during this time the bulls will do everything in their power to take the index up to the 14000 level as long as there are no economic or fundamental catalysts that cause fear to re-surface, as it was with the Greek crisis. As such, barring any unforeseen events, the probabilities are high that further upside will be seen for the next few weeks.

NASDAQ Friday closing price - 3067

The NASDAQ did not look back this past week, like the DOW and the SPX, and forged another new 12-year weekly high, suggesting that the bulls continue to key on this index and are buying everything in sight. Stocks such as AAPL, NFLX, AMZN, GOOG and PCLN all had strong up weeks and are showing no intention of correcting at this time. Everything continues to look rosy for the index.

The NASDAQ has no resistance whatsoever until it reaches the 3204 level and even then that resistance is 12-years old and it is from a weekly low close which offers the bears no assurance that selling will be seen there. Other than some unexpected world calamity, there are no reasons at this time for the bulls to stop buying. All the stocks mentioned above have much higher objectives and are not likely to fall back until objectives are reached. Case in point, AAPL has a $700 objective (stock closed at $596 on Friday). Further upside is expected.

On a weekly closing basis, the only resistance found near-by is the low weekly close from the year 2000 at 3204. On a daily closing basis, very minor resistance is found at 3078. Above that level, there is no resistance found above over the past 12 months. 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 very minor at 3063 and minor at the recent breakout high at 2988 and decent at 2910.

The NASDAQ was the only index that did not see any selling or profit taking of consequence this past week. The index did pause slightly in the uptrend as it reached a high of 3087 on Monday and spent the rest of the week trading sideways between 3044 and 3090. By the same token, the 3044 low was seen on Friday and the index turned around to get above Thursday's high and a green close, generating a positive reversal signal that suggests that last week's high at 3090 will be broken this coming week. The action being seen in the index is so positive that is it difficult for the bears to make any impact whatsoever. Until such a time that some negative catalyst is found, the index is likely to continue moving higher at least until the 3204 level is reached.

The 3044 level does become a small support level for this week that if broken would likely cause the NASDAQ to fall back down to the 3000 level which is now considered decent support. Probabilities favor further upside this week.

SPX Friday closing price - 1397

The SPX generated a reversal signal this week having gone above the previous week's high at 1405 (rallied up to 1414) and then closing in the red and near the lows of the week, suggesting that further downside will be seen this coming week. The index also failed to confirm the break above the minor to decent weekly close at 1400, closing below that level on Friday and stumping the rally that was supposed to take the index at least up to the 1422 level if not up to the intra-week high at 1440 that was seen in May-8.

The failure to rally in the SPX was especially disappointing given the fact that the negative news that came out this past week (China's slowdown) was mostly economic and not financial and therefore more likely to affect the DOW and the NASDAQ. Nonetheless, neither of those indexes gave failure signals, as the SPX did, and the NAZ was actually able to shrug off the negatives and rally. The action does suggest that the good news about the financial industry has now been factored in and that the index will likely take a back seat to the other indexes from here on in.

On a weekly closing basis, resistance is minor at 1405 and again at 1413 and minor to decent at 1425. Above that level, there is minor resistance at 1455, minor to decent at 1504 and strong resistance between 1552 and 1561. On a daily closing basis, there is minor resistance at 1409. Above that level, there is no resistance found in the last 12 months. On a weekly closing basis, support is very minor at 1388 and at 1375, decent at 1363, minor again at 1325 and decent to perhaps strong at 1268. On a daily closing basis, support is minor at 1392, minor to decent at 1363 and decent to perhaps strong at 1343.

The SPX did have a reversal day on Friday having made a new 7-day low but then closing in the green suggesting that the first course of action for Monday will be to the upside. Nonetheless, the index will run into resistance strength between 1400 and 1401 that is likely to be an important pivot point for the entire week. If the index is once again able to establish itself above 1400, it would be likely that the mini correction is over and that the traders would attempt to get the index above the recent high at 1414 and target the stronger resistance at 1440. By the same token, if the traders fail to establish the index above 1400, the probabilities will increase that the recent breakout area at 1363 will be seen.

It is important to note that 2 weeks ago the SPX spiked up one day from 1371 to 1396 breaking above a previous intra-week high at 1378 and generating strong buying that was able to break and close above the important 1400 area. If that spike is negated with a drop back down to 1371, or even down to below the breakout area at 1378, it will put the index back on the defensive and take away a lot of the recent momentum that has been seen. In the process, that would also likely mean that a new positive catalyst would be needed to regenerate the trend. As such, because of Friday's reversal, Friday's low at 1386 could be important this coming week.

In looking at a group of 10 financial stocks that are part of the SPX it does need to be mentioned that a good portion of those stocks are at levels (or close to levels) of decent resistance and therefore technical buying cannot be depended on to push the index higher. One such example, in WFC, puts the stock at a level that has proven to be mostly a brick wall during the last 4 years. If the index is to go higher breakouts in several of the stocks are going to be needed and that may be a tall order.

The SPX did have a negative reversal week and a close in the lower half of the week's trading range suggesting that 1386 will be broken at some point during the week. What happens then, and how low the index gets down to, will be the important question-to-be-answered this week.

Though a drop down to the breakout area at 1363 is a technical possibility, the reality is that having been able to close above 1400 the previous week the bulls are now committed to taking the 1440 level out at this time. A drop down to 1363 would make that very difficult to accomplish, and especially by May when the strong seasonal tendency for the market to drop comes into play. As such, the bulls are committed to taking the index higher this week or face a close-to-impossible task thereafter.

The indexes showed a united front the previous week but this past week looked like a dysfunctional family with the NASDAQ showing strength, the SPX failing, and the DOW caught in the middle. The burden of proof, though, is still in the hands of the bears as they are the ones that have to prove that the reasons for the strong rally over the past 4 months have disappeared and that is not going to be easy to do without some new calamity taking place.

This coming week will provide some tools that can help the traders decide what to do. Durable Goods orders, 3rd estimate of GDP, 20-city Case-Shiller report, Chicago PMI, and Michigan Sentiment all come out this week and though none of these reports by itself are likely to have a major impact, it does give the traders information they can use to edge the indexes in one direction or the other at a moment where they are at important pivot points. By the same token, this coming week also offers a ready-made tool for helping the market go higher in the way of end-of-the-month window dressing that will cause the large institutional and hedge funds to push for higher prices by Friday to make the books look good.

China and Europe remain as possible negative catalysts but then again the big report from China about the economy did come out this past week and that likely means that most of the negatives have been factored into the price of the indexes at this time, at least until next month when the next set of economic reports of consequence come out. Probabilities do favor the indexes rallying by the end of the week, but the intra-week action could include some temporary but likely mild weakness by mid-week.