DOW Friday closing price - 14000

For the past 4 weeks and on a weekly closing basis, the DOW has traded in a very narrow trading range of 28 points having generated closes at 14009, at 13992, at 13981, and at 14000 respectively. It is strongly evident that the traders are at an impasse and need some additional fundamental information to break out of these levels. On a chart basis though, it should also be mentioned that going back 10 years there has only been 1 similar situation, back in 2004, in which the index traded over a period of 7 weeks in a 119 point weekly closing trading range (10600, 10568, 10488, 10593, 10627, 10583, and 10595) before the situation was resolved and in that case it was resolved to the downside. It is also interesting to note that the last close of those 7 weeks at 10595 came the week of March 1st, which is this next week. The index then proceeded to drop 800 points (on a weekly closing basis) in the subsequent 7 months having closed at 9757 the third week of October, before resuming the previous uptrend.

On a positive note, the DOW did generate a positive reversal having gone above last week's high and below last week's low and then closing in the green and in the upper half of the week's trading range. The close was only 19 points above last week's close and the bulls had to fight strongly at the end of the day to accomplish such a close but it is a positive that could generate further technical buying this week, with 14093 (all-time high daily and weekly close) or even 14198 (all-time intra-week high) as the objective.

On a weekly closing basis, resistance is minor at 14009 and major at 14093. On a daily closing basis, there is minor resistance at 14009 and at 14018 and a bit stronger at 14035. 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 now decent at 13860/13880. Below that, there is very minor support at 13511, minor to perhaps decent at 13413 and minor to decent at 13326/13328.

On an intra-week basis, the DOW did break on Thursday the support built over the past 3 weeks at 13850 but no follow through was seen to that break, causing the bulls to come roaring back in on Friday to close on the highs of the day suggesting the first course of action at the beginning of the week will be to the upside. With no economic reports due out on Monday, there seems to no chart reason for the index not to make another new 5 year high this coming week.

The traders, though, also have no reason to make new all-time highs, either intra-week or on a daily closing basis, and therefore the probabilities of another week of sideways trading, with perhaps a slight upward bias, are high. By the same token, there are many important economic reports due out this week with the most important one, the ISM Index, coming out on Friday. The probabilities do favor some kind of fundamental decision by the end of the week with the following week seeing some decisive direction.

The key level to the upside this week is 14198 (14093 on a daily and weekly closing basis). The key level to the downside this week is 13834 (13860 on a daily closing basis.

In looking at the chart of the DOW the probabilities favor another uneventful week of trading, at least until Friday. Even then, if none of the reports during the week are surprising, the probabilities favor an uneventful close on Friday with the following week the traders choosing a direction. By the same token, it must be mentioned that at these prices, further upside action needs positive news where downside action simply needs profit taking to occur.

NASDAQ Friday closing price - 3161

The NASDAQ generated a "key" reversal this past week having made a new 13-year high and then closing in the red below last week's low. The index had already shown some weakness the previous week with a minor 1 point reversal red close but this reversal was much more indicative having closed 32 points below last week's close while giving a failure to follow through signal in the process, as well having closed below the previous high weekly close from September at 3183.

The NASDAQ also showed additional weakness having gapped down between 3164 and 3155 on Thursday and then not closing the gap on Friday when the rest of the indexes showed strength. The gap is likely to be closed this coming week as the index did close on the highs of the day on Friday at 3161 but if by any chance the gap is not closed, it would be a strong signal that no further upside will be seen.

On a weekly closing basis, there is minor resistance at 3183 and decent to perhaps resistance at 3193. Further decent resistance is found at 3205. Above that level, no resistance is found until the 3500 area is reached. On a daily closing basis, resistance is decent between 3179 and 3183, minor at 3196 and strong at 3213. On a weekly closing basis, support is minor at 3000 and decent at 2960. On a daily closing basis, support is very minor at 3142 and decent to at 3131. Below that, there is minor support at 3110, minor to decent support at 3091, and at 3044/3048.

The NASDAQ now shows a triple low on the daily closing chart at 3130/3131 that is now going to become a magnet for the traders to break sometime in the near future. Nonetheless, for now that support is what helped generate the rally on Friday and close on the highs of the day, suggesting further upside will be seen this coming week. Resistance on the daily closing chart is going to be decent at 3179/3183 as that was the previous 13-year daily closing high in September as well as the high daily close the beginning of February. This coming week those 2 levels will dominate the attention of the traders. Trading within that range will be meaningless, but above or below those levels on a daily closing basis will be indicative, especially if it is to the downside.

On Monday, the first thing the traders will be looking at is the gap between 3165 and 3161. The probabilities are high that the gap will be closed, especially since the index closed on the highs of the day. If by any chance the gap is not closed on Monday then the gap will become more important, but for the time being it is likely the gap will be closed. A rally up to at least 3183 will be seen if the gap is closed and there is a decent chance the index might get up as high as 3200 on the intra-day chart. Nonetheless, on a daily closing basis the traders will have problems closing above 3183.

The NASDAQ did close in the lower half of the week's trading range and with the key reversal made it is likely that further downside, at least on an intra-week basis, will be seen this coming week. The 50-day MA is currently at 3110 and important intra-week support is found between 3077 and 3080, suggesting that one of those levels are likely to be seen this week. Nonetheless, a daily close below 3130 will be considered a decent negative.

The NASDAQ gave a strong negative signal this past week and if confirmed this coming week with another close either in the red or in the green but below 3183, it is likely the index will head lower thereafter. As such, this is a very pivotal week for both the bulls and the bears with the bulls needing something positive to happen to undo the negative signal given. The probabilities are now high that the NASDAQ has found a top to this rally.

SPX Friday closing price - 1515

The SPX generated a reversal this past week but the bulls had to rally the index 2 additional points in the last few minutes of trading on Friday to prevent a "key" reversal from occurring, had the index closed below 1513. Nonetheless, the index did go both above and below last week's trading range and did close in the red suggesting that a top may have been found, especially since the index has reached levels of resistance (especially last week's high at 1530) that should stop further upside.

The SPX, like the DOW but unlike the NASDAQ, remains with a decent chart possibility of still going higher this coming week as it closed in the upper half of the week's trading range and on the highs of the day on Friday. In addition, unlike all the other indexes, the traders were not able to break below the lows seen the first week of February, which means that there is still more support seen in the financial industry than there is anywhere else.

On a weekly closing basis, minor to perhaps decent resistance is found at 1519/1520, minor at 1536, decent at 1552 and major at 1561. On a daily closing basis, minor resistance is found at 1521 and decent at 1530. On a weekly closing basis, support is minor at 1440 and decent to perhaps strong at 1402. On a daily closing basis, support is minor to decent at 1502 and decent 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.

As mentioned in the last newsletter, the SPX was likely to close in the red on Friday as there has not been more than 7 weeks in a row of green closes since 2004. Nonetheless, having said that there have been 3 occasions in the past where the index generated 7 green weekly closes in a row, then a red close followed by a green close. As such, the probabilities do favor the index closing in the green next Friday. By the same token, most of the times this scenario occurred it did mean the index was in the process of topping out and heading south thereafter.

To the downside, the SPX still shows decent support between 1495 and 1497 and to the upside resistance is found at 1518/1520 and then strong at 1530. With this coming week having quite a few important economic reports it is likely that a decision will be made no later than the beginning of next week. In the meantime, the probabilities do favor the index trading the range between 1495 and 1530 with 1500 and 1520 being the most probable trading range for the first couple of days of the week.

The indexes all showed signs of topping out this past week but the bulls were able to prevent a break of support on the weekly chart with a rally on Friday. Nonetheless, mixed signals were given inasmuch as the DOW is likely to shed the weakness and make new intra-week highs, the SPX is 50-50 on a new high, while the NASDAQ has low probabilities of a new high being made. The mixed signals suggest that the indexes require positive fundamental information (unlikely to be seen) to resume the uptrend.

This coming week does have quite a bit of economic information with 20-city Case-Shiller index and Consumer Confidence coming out on Tuesday, Durable Good on Wednesday, second estimate of GDP and Chicago PMI on Thursday, and the ISM Index and Michigan Sentiment on Friday. Some construction information is also due out throughout the week. It is unlikely that any of these reports will be much out of line and therefore not catalytic. Nonetheless, the bulls do need "more" positive news to stimulate additional buying at these levels and if they don't get it, the probabilities will favor profit taking and a correction.

Based on Friday's action it is likely the indexes will rally at the beginning of the week but like what has been seen during the last 4 weeks it is unlikely the rally will generate any kind of movement of consequence, up and above what has been seen recently. Nonetheless, each index is starting to show some proclivity for moving on its own based on industry seasonal tendencies as well as on risk aversion. Simply stated, the Blue Chip stocks are likely to show more support because they are normally less risky and tech stocks likely more resistance because of they are more volatile as well as risky. Nonetheless, in all cases, by next week the probabilities are high that some overall direction will finally be evident.