DOW Friday closing price - 15461

The DOW was able to make a new all-time weekly closing high after Fed Chief Bernanke assuaged fears that stimulus would not be cut until the economy showed "true signs" of recovery in GDP and unemployment. The index closed above the previous all-time weekly closing high at 15354 that was made in May and does suggest the uptrend has now resumed and that further upside will be seen.

The DOW did accomplish fulfilling the seasonal correction adage (sell in May and go away) with a 991 point drop over a period of 5 weeks from the middle of May to the third week of June, which also fell within the 1000-1600 point average seasonal correction seen in past years. In addition, the index was also able to get rid of the overbought condition that had been in existence since the end of the year.

On a weekly closing basis, there is no resistance above. On a daily closing basis, there is no resistance above. On a weekly closing basis, support is minor at 15354 and decent at 14799. On a daily closing basis, support is minor at 15409 and minor again between 15296 and 15318. Below that level, support is decent at the 15000 demilitarized zone and decent to perhaps strong at 14659.

The DOW closed on the highs of the week and further upside is expected to be seen, especially with no resistance above. Nonetheless, the third quarter earnings quarter will begin in earnest this week and earnings will likely help decide what the index will do thereafter.

It should be mentioned that in both 1999 and in 2007 when new all-time highs were made in May, the DOW had been in a major uptrend for about the same period of time as this recent uptrend has been in process. On those 2 occasions, the new all-time highs in May were followed by small seasonal corrections of 721 points and 424 points, respectively. New highs were again made in July, followed by corrections of 1359 and 1504 points, also respectively. The tops to the uptrend were seen in October and December and were followed by a long-term sideways to lower trend and a downtrend, respectively as well. The most important fact to mention is that the index only rallied 630 points and 385 points from the highs in 1999 and 525 and 177 points from the highs in 2007.

It is difficult to speculate on whether this instance relates closely to those 2 past occasions inasmuch as the Fed involvement is a monkey wrench that cannot be factored in easily. Nonetheless, the path the DOW is following right now bears striking resemblance to what happened in those past years and with the likely scenario that the traders are way ahead of themselves at this time, the possibility of a repeat of what happened in 1999 is high. Between 1999 and 2002, the index got into a sideways to down trend with lots of peaks and valleys in the process that ended up taking the index from a high of 11750 to a low of 7197 over a period of 2 years. Such a scenario is certainly possible right now as these high levels the index is seeing are due mostly to Fed involvement that at some point will be withdrawn, likely causing the market to fall over a period of time.

Under such a scenario as outlined above, the DOW would likely continue higher but in a slow fashion with an upside objective of about 300 points above the previous high at 15542, followed by a stronger correction of 1300-1500 points (more than the one seen recently), followed once again by another new high probably about 200 points above the next high seen, and then followed by a long term sideways to down trend. Under this scenario, the upside objective would ultimately be the 16000 level, which is only 436 points above Friday's close, and all to happen over the next 2-4 months.

On a shorter term basis, the DOW did close on the highs of the week and further upside is expected to be seen. Nonetheless, there is a small possibility that the index will not follow the scenario outlined above since a new all-time high has not yet been seen on an intra-week basis. The previous intra-week all-time high is at 15542 and the high this past week was 15498, suggesting that if the earnings reports start coming out negative this week, that the bulls would fail to take the index higher. Under this scenario, a break below last week's low at 15137 would suggest that no further upside will be seen. The probabilities of this happening are low, but for the next 3 weeks the index will be at the mercy of the earnings reports and those could surprise negatively.

For this week, it is possible that volatility in the DOW will come back in, as earnings quarter usually offers. Support is minor to decent, but likely indicative at 15180. No support is found on the daily chart before that level is reached, meaning that the index could see swings this coming week that would put it down as much as 300 points without it being a overall negative.

Probabilities favor further upside in a slow, limited, but steady appreciation in price, rather than big swings up and down.

NASDAQ Friday closing price - 3600

The NASDAQ has once again taken the "bull by the horns" and led the indexes to the upside by making a new 13-year high this past week, both intra-week and on a weekly closing basis. The index was led by PCLN, AMZN, and GOOG, all of which made new all-time highs in an impressive fashion, and by NFLX that also made a new 17-month high. The index and the stocks mentioned above, all closed on the highs of the week and further upside, likely of consequence, is expected to be seen.

The NASDAQ has "open air" above as the only resistance found is on a weekly closing basis at the 3860/3880 level and even then you have to go back to the year 2000 to find it. With no resistance above for another 260-280 points, the index could run straight up to that level without "blinking an eye".

On a weekly closing basis, there is decent resistance between 3860 and 3887. at 3498. Above that level, there is minor to decent resistance at 4004 and decent to perhaps strong between 4234 and 4246. On a daily closing basis, there is no resistance above for the past 12 months. On a weekly closing basis, support is minor to decent at 3357 and decent at 3202/3206. On a daily closing basis, support is minor at 3502 and minor again at 3459. Below that level, support is decent at 3400.

The NASDAQ has been on an impressive run of 12 green daily closes out of the last 13 days and 7 in a row. The index has moved up 305 points in that period of time and improved almost 8% in value. With no end in sight as chart resistance is still 260 points away, the index could end up matching the run seen at the beginning of April when the index ran up for 23 trading days and 384 points before encountering any selling of consequence. There are no chart negatives found at this time that would suggest the index will slow down any time soon, other than the earnings quarter that will have GOOG reporting on Thursday after the close and AAPL, AMZN, and NFLX reporting the following week between Monday and Wednesday.

The NASDAQ is in a precarious situation though, as the impressive run has not built any support levels in the process. The previous daily closing high at 3502 is the only support found close-by but since it is a previous high daily close, the support there is considered minor. A bit further support is found at a minor previous daily closing low at 3459 that will include in a day or two the 50-day MA, currently at 3445. Nonetheless, neither of those supports have a high probability of holding up if the index is heading lower because the daily close support is very minor in nature and the 50-day MA has been broken repeatedly over the past year.

The bulls in the NASDAQ have to continue to push the index higher (though not necessarily in a big way) simply because the momentum is the main thing bolstering the index at this time. A drop back to the support at 3502 would mean a drop of 100 points and any drop of that magnitude would be considered a correction, which at this time would likely destroy any momentum built. With no earnings reports directly affecting the index due out until Thursday afternoon when GOOG reports after the close, the probabilities of further upside the first 4 days of the week are high.

The NASDAQ will likely continue to lead the index market this coming week and all the other indexes following what it does. The probabilities favor further upside, perhaps of consequence.

SPX Friday closing price - 1680

The SPX was also able to make a new all-time daily and weekly closing highs this past week when the stock closed above the previous weekly closing high made in May at 1667 as well as above the daily closing high at 1669. Like the DOW though, the index did not break the previous intra-week high at 1687, leaving the door open for some chart selling to be seen if any fundamental negatives appear.

The SPX will be the first to receive important earnings reports this week with C reporting on Monday, GS on Tuesday and BAC on Wednesday, all before the opening bell. JPM and WFC reported on Friday and those reports were both better than expected, so the probabilities do favor the reports this coming week also being good. Nonetheless, because this is the index receiving the first batch of important reports, the traders will be closely monitoring what the index does at the beginning of the week.

On a weekly closing basis, there is no resistance above. On a daily closing basis, there is no resistance above. On a weekly closing basis, support is minor to decent at 1592, minor to perhaps decent at 1558/1561, and decent between 1553 and 1555. On a daily closing basis, support is minor at 1669, minor at 1649, and very minor 1634. Support is decent between 1608 and 1612 and decent at 1573.

The SPXclosed on the highs of the week and the probabilities favor the intra-week high at 1687 to be broken this coming week, especially if the earnings reports do not disappoint. The index now has strong momentum to the upside and this past year the bears have not had much success in breaking upward momentum without fundamental help.

With the upside being a total unknown, the traders will likely be focusing on any negative movement that would suggest the momentum is over. The most evident move that would be considered a negative would be a break below last week's low at 1634, but for that to happen there would have to be some negative news announced. A close below the previous high daily close at 1669 would be the next clue that something is amiss but it certainly would not be sufficient to deter the bulls from continuing to buy any dips, especially if no negative news has come out.

The probabilities favor further upside in the SPX this week and if by Wednesday morning after BAC reports there has not been any selling of consequence, the bulls are likely to attempt to get up to the next psychological resistance at 1700.

The bulls are now back in control after Fed Chief Bernanke assuaged fears that the stimulus program might start receiving some cuts. The response to the announcement was immediate and powerful with the indexes surging upward in a strong and decisive way and then closing on the highs of the week with expectations of further upside being seen this coming week.

This coming week though, will have quite a bit of fundamental information with the first batch of important earnings reports due out, as well as a few important economic reports also due out this week with Retail Sales leading the way on Monday followed by CPI, Industrial Production and Capacity Utilization on Tuesday, Housing information on Wednesday and the weekly Initial Claims on Thursday. The biggest problem the bears are facing with the economic reports is that recently good was bad and bad was good but this past week that changed a little with bad being good and good being good as well, suggesting that the bears are "up the creek". The one thing that could still become a monkey wrench for the bulls are the earnings reports as the Fed is not likely to help the market due to lower earnings reports, suggesting that if earnings are starting to suffer that the market could suffer as well if the economy is not starting to slow down again. Probabilities do not favor that scenario occurring.

The charts do suggest further upside of consequence will be seen as the timing is right (first 3 weeks of earnings quarter), the momentum is strong, the charts are clear of resistance, and no "dark clouds" are on the immediate horizon.