DOW Friday closing price - 13992

The DOW technically generated a reversal week having made a new 5-year high, a lower low than the previous week and a red close. Nonetheless, the lower low was only by 9 points, the higher high was only by 3 points and the close (though in the red) was near the highs of the week suggesting that reversal was meaningless as the probabilities favor further upside this coming week. By the same token, it is now 2 weeks since the last batch of economic reports came out and the momentum to the upside has stalled. The bulls have been unable to generate new buying at these levels and likely need further fundamental help to go any higher.

The DOW traded all week in a narrow trading range between 13852 and 14022 (170 points) and it is considered that the index is either in a pause/consolidation phase before renewing the uptrend or in a topping out segment. The trading range has now been in effect for 10 trading days (2 weeks) and it is evident the traders are waiting for further economic news, or a catalyst, to make bigger decisions as to what to do for the next few weeks.

On a weekly closing basis, resistance is major at 14093. On a daily closing basis, there is minor resistance at 14009. Above that level, there has been no previous daily closing high in the last 12 months. On a weekly closing basis, support is minor at between 13232 and 13275. Below that, support is minor at 12849 and decent at 12588. On a daily closing basis, support is minor at 13944 and at 13880 and minor to perhaps decent at 13860. Below that, there is very minor support at 13511, minor to perhaps decent at 13413 and minor to decent at 13326/13328.

The DOW did not accomplish anything this past week other than keeping the uptrend intact for 1 more week. The recent rally has now gone for 13 weeks in a row without a correction of consequence and though some of the overbought condition has been resolved with the sideways trading for the last 2 weeks, the fundamental reasons remain the same and they do not favor new all-time highs being made at this time. Many hedge and institutional buyers have recently stated that they are planning on reducing their portfolios at this time, not increasing them.

It should be mentioned that he DOW is still in the main timeframe for the seasonal correction to start. Though some years the seasonal correction started in January and some years it started in March, the highest number of starts for the seasonal correction has been in February. In fact, the last start of a seasonal correction most similar to this one in the nature of the rally was in the second week of February 2007 (the year the all-time high was made) when the index got up to 12779 and then corrected back down to 11939 by the second week of March.

To the upside, the DOW will find decent intra-week resistance at 14021 and major resistance at 14198. Some resistance may be found at the all-time high daily and weekly close at 14093. To the downside, the index has built some decent support over the past 2 weeks at 13850/13860. Nonetheless, below that there is no support until minor support is found at 13500. Stronger support is found between 13300 and 13360. It should be noted though, that general support will often be found 300 points below a major level, suggesting that 13700 may offer some type of support as well. It should be mentioned though that no support is found on the weekly chart until 12883 is reached.

The rally in the DOW has now stalled since the last batch of important economic reports came out 2 weeks ago. The traders have been reluctant to continue the rally without further indications that the economy is recovering. This coming week the only report of some consequence is Retail Sales and that report by nature is volatile, which likely means it will not be catalytic in either direction unless way out of line. Europe is once again in the news and news from that area can be catalytic, but then mostly negatively. Nonetheless, there are no "scheduled" news events from Europe that are considered highly important. As such, the traders are likely to continue trading the support/resistance levels and reacting to a break of those levels technically.

The DOW is facing another week where new buying is likely to be minimal, at least until such a time that a good correction occurs. Nonetheless, on a purely chart oriented basis, the index still has a bit of room to the upside to generate further gains this coming week. The all-time high at 14198 will be difficult to break but testing that area can be seen this coming week, meaning that an additional 200 points to the upside can still be seen within the context of topping out action.

NASDAQ Friday closing price - 3193

The NASDAQ made a new 13-year weekly closing high on Friday breaking above the high made in September at 3083. The index closed on the highs of the week and further upside is expected to be seen this coming week. The index seems to be taking the leadership role to the upside once again, as it did for most of the last 4 years, but that fact is not yet clearly evident as the rally this week was not significant and was helped mostly by the #1 stock in the index (AAPL) rallying a bit off of its recent lows.

The NASDAQ did get up to the previous intra-week double top at 3195/3196 but failed to break that area. Nonetheless, the index now shows a triple top at that price and the probabilities favor that level getting broken. On a weekly closing basis, there is minor to perhaps decent resistance at 3205. Above that level, no resistance is found until the 3500 area is reached. On a daily closing basis, there is no resistance above for the last 12 months. On a weekly closing basis, support is minor at 3000 and decent at 2960. On a daily closing basis, support is minor at 3163 and decent at 3130/3131. Below that, there is minor support at 3110, minor to decent support at 3091, and at 3044/3048.

The NASDAQ was successful this past week on the heels of GOOG making new all-time highs, NFLX continuing its major run since the earnings report came out, and AAPL showing signs of life having rallied 10% in the last 2 weeks off of its recent low. Further upside is likely to be seen in all of these stocks this coming week, suggesting that the index will continue higher for now.

To the upside, the NASDAQ shows no previous intra-week resistance for the past 13 years until 3535 is reached. Nonetheless, on a weekly closing basis, the index does show a strong previous weekly low close at 3205 from May00. Previous low closes are never more than minor to perhaps decent resistance levels but they do work on occasions. Intra-week resistance "might" be found at 3250 but it is not from any previous intra-week highs or from any MA lines, it is from a channel the index seems to be in, using the highs seen in March and September and the lows seen in June and November. The channel is perfectly formed and likely to effective if the index does get above 3196. Strong trends often transform into less steep but still positive channels for a period of time before a major top is found. The chart of the NASDAQ suggests the index is in such a channel and that the top of the channel will be reached on this rally, if and when 3196 is broken. By the same token, a rally up to that line will probably meet with strong selling and cause the index to drop back and generate a weekly close around 3205, somewhat "killing 2 birds with 1 stone".

It should be mentioned that AAPL is not likely to rally more than $25 from its currently closing price, NFLX is likely to be heading downward for the short term as the stock has rallied 80% in just 1 week, and GOOG has rallied 15% in the last 3 weeks and is due for a pullback as the rally has been straight up and no support levels have been built on the way up. As such, it is probable that the NASDAQ will see higher prices but not much and not for long.

To the downside, the NASDAQ does have some potential problems as no support of consequence has been built on the weekly chart until the bottom of the channel at 2845 (mentioned above) is reached. The 50-week MA is currently at 3000 and that could generate some support but MA lines cannot be depended on strongly. The daily chart does show some decent intra-week support between 3130 and 3135 but already that level shows three lows giving it a high probability of being broken at some point. Further support on the intra-week chart is found every 10-30 points starting below 3130. Nonetheless, none of the minor support levels are likely to offer enough support to stop the index until 3076/3080, should it start heading lower. Even then, the support at 3076/3080 is at best decent and if the index gets down to that level the last major gap between 3021 and 3076 might prove to be enough of a strong magnet that the traders would choose to close the gap. If that happens, the 200-day MA, currently at 3000, would then be the immediate downside objective. If all of that happens and the index drops those 200+ points, the probabilities of the index dropping an additional 155 points down to 2845, would be higher.

In looking at the chart of the NASDAQ, and looking at the momentum seen in the index market as of late, I would venture to say that the NASDAQ will break above 3196 and head up to the 3250 level this coming week. It is likely that many traders will consider this another major breakout, but the channel scenario is valid and likely to be correct. As such, should the index get up to 3250, I would become a strong seller. I do not expect to see the index close above 3205 next Friday. It should be mentioned that since April 2010 the index has only had 1 rally in which 7 green weekly closes in a row were seen and on that occasion the index then went ahead and corrected more than 400 points in a matter of 9 weeks. Friday was the 6th green weekly close in a row.

In the NASDAQ, the top is close, and likely to be found this coming week or at most the week after.

SPX Friday closing price - 1517

The SPX extended the recent uptrend having closed 4 points higher than last week. Nonetheless, it was not "all roses" for the index as it traded below last week's close all week until Friday when the traders got "back on the horse" to generate a higher weekly close to keep the uptrend intact. Like last week, the index did close on the highs of the week and further upside is expected to be seen this coming week. By the same token, the index is now into an area between 1517 and 1532 where decent resistance is found and the probabilities of the index going substantially higher diminish every day as the gains pile on.

The SPX finds itself entering an area that has been strong to major resistance on 2 previous occasions during the last 12 years (not 1 like in the DOW), making the area even more difficult to break without "strong" fundamental reasons to do so. By the same token, the index did technically generate a classic reversal this past week having gone below the previous week's low at 1496 by 1 point (1495 low this past week) and then closing above the previous week's high at 1513, suggesting the bulls could use this action as a slingshot to higher prices.

On a weekly closing basis, minor resistance is found at 1536, decent resistance at 1552 and major resistance at 1561. Nonetheless, if you go back to the year 2000, decent resistance is found at 1520. On a daily closing basis, no resistance above is found for the past 12 months. On a weekly closing basis, support is minor at 1440 and decent to perhaps strong at 1402. On a daily closing basis, very minor support is found at 1509 and minor at 1495. Further minor support is found at 1465/1470, at 1457 and at 1433. Decent support is found at 1428 and strong support is at 1402.

The SPX is now into an area where stronger resistance should be seen. In the year 2000, the 1517 to 1530 level offered decent to strong intra-week resistance. By the same token, in 2007 and on the way down, the 1523 level came up as decent intra-week resistance. On a weekly closing basis though, the most recent resistance (in 2007) is at 1536, then at 1552 and then at 1561, meaning that if the year 2000 is disregarded, the index could still rally another 20-40 points before strong selling is seen.

Nonetheless, because of the changes in the rules the financial companies now have to follow after the 2008 fiasco, I believe the traders will be looking more at the resistance levels from the year 2000 than the ones in 2007. In the year 2000 and on a weekly closing basis, the 1520 to 1527 area stopped the rally. In 2000 the index did have one week where it got up to 1552 but the weekly close that week was 1527. With the index having closed at 1517 on Friday, it is likely that on a weekly closing basis no more than another 3-10 points will be seen to the upside now. I firmly believe that any rally above 1527 will now be met with strong selling.

The SPX has now rallied 121 points (8%) in the last 7 weeks and 174 points (12%) in the last 3 months. This rally, compared to the previous one at 14%, should be at an end very soon based on each wave of the Eliot Wave theory being smaller than the previous one.

To the downside, the SPX now shows pivotal support at 1495. The index has been down to 1496, 1495, and 1498 on 3 occasions during the last 2 weeks and if that level is broken, the traders are likely to see it as a sign that the seasonal correction has started. Below 1495 there is no dependable support of any kind until 1424 is reached. The previous high at 1470, the 50-day MA, currently at 1457, and the 100-day MA, currently at 1443 could all be support levels but they are not support levels the traders can count on. Even then the 1425 level is considered only minor support and therefore it is possible the index could drop all the way down to 1396/1400 where stronger support is found, if and when the 1495 level gets broken.

From this price on, it is likely the SPX will find the selling increasins, either from profit taking or new shorts being put on. The big question is "at what price exactly and what date will the tide turn?".

All-time highs are always difficult to make since the fundamental situation needs to be healthy enough to support such a break. Fundamentally speaking, the U.S. economy still finds itself weak (GDP shows little or no growth) and more importantly "needing support" from the Fed to keep itself afloat and therefore not something that is likely to give the traders enough confidence to buy aggressively at these levels in order to make new all-time highs. The Fed itself has unequivocally stated that until it feels the economy can stand on its own, it will continue to offer stimulus. Not "standing on its own" is a statement that says it all. It will always be difficult to "make things grow more" if you are still depending on "daddy" to keep the company afloat.

The market has seen a fair amount of selling over the past 2 weeks having seen 5 green and 5 red close days in the indexes. Europe is starting to stir again and any stirring that occurs there is more likely to be negative than positive. Earnings are mostly over for the quarter and economic reports of consequence are not due out for another 2-3 weeks and even then, it is unlikely those reports will be good enough to say that the economy is now healthy again. The market is overbought and many hedge and institutional funds have stated they are cutting back and not increasing their purchases. So what is keeping the market going up? Momentum mostly, and that can change as soon as the pivot point breaks to the downside and that pivot point has now been seen repeatedly over the past 2 weeks.

Further upside "needs" further positive reports and right now those are in low supply.