DOW Friday closing price - 13649

The DOW made a new 63-month weekly closing high on Friday putting itself in a viable position to test the all-time weekly closing high at 14093 (14198 intra-week) in the very near future. The index has now been able to erase all the chart negatives of the last recession as the index broke above the first successful weekly close retest of the all-time high at 13625, seen Dec07, suggesting that fundamentally the index is once again healthy and that testing the high is not an "if" anymore but a "when". The recent intra-week high seen in October at 13661 was not broken but the index did close on the highs of the week on Friday and will likely break that high first thing on Tuesday when the market re-opens.

On a negative note, though, the DOW is in an overbought condition and facing a seasonal tendency to correct that generally starts in February after the bulk of the earnings quarter results are out. Looking back on previous seasonal corrections, the one in 2005 started on February 12th and the one in 2007 started on February 28th. Those 2 corrections are particularly indicative as the index was in the same type of bullish rally as what is being seen now.

On a weekly closing basis, resistance is minor to decent at 13907 and major at 14093. On a daily closing basis, 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 very minor at 13511, minor to perhaps decent at 13413, minor to decent at 13326/13328, minor at 13077 and decent to strong at 12936.

The DOW broke out of a bullish flag formation a week ago Thursday that does offer a 13857 objective. Nonetheless, the break above the top of the flag at 13447 did not generate the kind of flagpole effect that should have been seen, suggesting that the objective might not be reached, or not reached as fast as it would normally be. There are many earnings reports of consequence specific to the DOW this coming week with IBM, JNJ, DD, and TRV due out Tuesday evening after the close. The index is going to be sensitive to earnings reports this quarter as they are expected to come in lower than other quarters and any surprises on either side will likely affect the movement in the index.

To the upside, the DOW shows no resistance this year above 13661. A break of 13661 will give the bulls "open air" above until the psychological resistance at 14000 is reached. Some resistance will be found at 13692 and at 13780 but the traders have to go back to 2007 to find that resistance and even then both of those resistance levels are considered minor. As such, there are no levels close-by the bears can depend on for selling resistance to be found. With the index having strong momentum to the upside (7 of the last 8 days closing in the green), and no economic reports of consequence due out this week, there is little to stop the index from continuing higher unless the earnings reports on DOW stocks come in negative.

To the downside, the DOW shows very minor support at 13502, minor to decent support at 13367, and decent support at 13296/13293. Any stoppage of the momentum or unexpected negative earnings report could generate some decent profit taking and selling by top pickers, causing the index to drop down to one of the support levels mentioned.

This coming week it will all be about earnings reports. The reports seen up to now have not had any negative surprises below expectations so the probabilities favor continued upside. The trading is likely to continue as it has been for the past 8 days with the DOW moving higher consistently but not with any kind of spike movement. It is possible and perhaps even probable that as the index goes higher that more volatility will be seen and that some red days will be seen as well. The 13500 level is now likely to be supportive, at least for this coming week, and not likely to get broken.

NASDAQ Friday closing price - 3134

The NASDAQ generated another green weekly close and inched closer to the 14-year weekly closing high at 3183. Nonetheless, the index was only able to close 9 points higher than the previous week suggesting that buying in the market is being seen more in the other indexes than on this one, at least at this time. On a positive note, though, the index did close the runaway gap between 3127 and 3130 on Thursday, suggesting that the breakaway gap between 3178 and 3176 will now be targeted by the traders, likely meaning that the index will continue to head higher this coming week.

The NASDAQ will probably become the most important index over the next few weeks inasmuch as it was the leader to the upside between 2009 and 2012 and if the recent uptrend continues and a new 14-year high is made, the index will likely take the leadership role again. Nonetheless, if the breakaway gap at 3078 is closed and the index does not break above the double top at 3195/3196 and make new 14-year highs it will likely mean that this rally in the market will fail this time around. Nonetheless, that still leaves the index with high probabilities of moving up higher over the next few weeks with 3178 as the objective (44 points higher than Friday's close).

On a weekly closing basis, there is very minor resistance at 3136 and major resistance at 3183. On a daily closing basis, resistance is minor at 3136, minor to decent at 3149 and major at 3183. On a weekly closing basis, support is minor at 3000 and decent at 2960. On a daily closing basis, support is minor at 3110, minor to decent at 3091 and at 3044/3048, minor to perhaps decent at 2988 and decent at 2960.

AAPL was the stock that kept the NASDAQ under some selling pressure this past week as the stock continued to show weakness having broken and closed below the important psychological support at $500 one day this past week. The stock does not show any intra-week support of consequence until the $400 level is reached and if the weakness continues it will help drive the index lower. The stock does report earnings on Wednesday after the close and that report could make a big difference in what happens to the index the rest of the week.

The NASDAQ had a red day on Friday, mostly because of AAPL, but did close near the highs of the week suggesting that further upside will be seen this coming week. The high last week was 3144 but with no previous resistance at that level the probabilities favor the level breaking and the index heading up to the October high at 3171 before any selling of consequence is seen. It must be mentioned that 3171 does have some importance inasmuch as it was a spike high and "the" successful retest of the double top at 3195/3196. Rallies up to that level do have a high probability of being seen but breaks above that level will likely require some fundamental help. By the same token, if 3171 is broken the breakaway gap at 3178 will likely be closed and that will mean that the double top will only be 18 points away, suggesting that the bulls will do everything in their power to accomplish getting up to and breaking that level and generating a chart situation with no resistance above for another 300 points.

To the downside, the NASDAQ now shows minor support at 3093 and decent but important support between 3076/3080. A break below 3093 will slightly weaken the upside momentum but a break below 3076 could be a catalyst of consequence to the downside inasmuch as the bears would likely target closure of the important gap to the upside between 3021 and 3076. The strong gap, which has been successfully tested once already, is one of the strong reasons the index has continued to move higher. Closure of the gap would be a chart negative that would strongly deflate the bullish aura presently being felt.

This is an important week for the NASDAQ as 3 of the top stocks in the index report earnings. On Tuesday afternoon GOOG reports and on Wednesday afternoon AAPL and NFLX report. GOOG and AAPL are industry leaders and yet both have been under selling pressure as of late. It is difficult to believe that the market will make new highs, or even test them, if those 2 stocks are not actively participating to the upside. GOOG closed on Friday at $704 and does show important support at $696. AAPL closed on Friday at $500 and if the stock starts trading again below that important psychological support it could continue dropping significantly.

With so much depending on what happens on Wednesday and Thursday (after the reports come out), it is very difficult to anticipate what the index will do on the next weekly close on Friday. By the same token, there is little to stop the NASDAQ from rallying on Tuesday and Wednesday and fulfilling the upside objectives, with reaching 3171 being the primary one.

Expect further strength at the beginning of the week and then it will likely depend on the earnings reports due out mid-week.

SPX Friday closing price - 1472

The SPX continues to be "the" strong index in the market having made a new 61 month intra-week and weekly closing high on Friday, as well as being the leader of the indexes for the past 8 weeks. The index closed on the highs of the week and further upside is expected to be seen with 1498/1500 being the minimum objective.

The SPX has been leading the market due to the fact that the financial problems that were besetting Europe in the past year have now been put aside due to the actions taken by the ECB during the past few months. As such, money has been flowing to the financial industry due to the fact that it has been the most depressed area of the market since 2008. Nonetheless, the index is now within reach of the all-time highs at 1576 and leadership of the market is not likely to continue for much longer due to the fact that financial institutions can no longer enjoy the kind of profits they were experiencing before 2007 as rules have changed. As such, it is highly unlikely the bulls will be successful in making new all-time highs in this index.

On a weekly closing basis, minor resistance is found at 1504 and at 1536, decent resistance at 1552 and major resistance at 1561. 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, minor support is found at 1465/1470 and again at 1457 and at 1433. Decent support is found at 1428 and strong support is at 1402.

The SPX broke out of a bullish flag formation a week ago Thursday that has a 1520 objective. Nonetheless, like with the DOW, the index did not have a flagpole type of follow-through suggesting the objective might not be reached, or not be reached in a fast manner. By the same token, the index does not show any intra-week resistance of consequence until 1523 is reached, meaning that getting up to the flag objective is a high probability. It should be mentioned, though, that the resistance above 1523 is considered decent to strong starting at 1530 and all the way up to the all-time high at 1576.

The SPX does have a chart scenario that is quite different from the other indexes inasmuch as the SPX got up to 1552 back the year 2000 whereas the DOW only reached 11750 on that occasion. By the same token, that was the year that the NASDAQ got up to 5132, though it is difficult to compare with the NASDQ as that was the year the dot.com euphoria erupted causing the other indexes to take a back seat to the NASDAQ. On the other side of the coin, the rules and regulations now in place in the financial market do not strongly support the index making new all-time highs, also suggesting that the index will have a very difficult time getting above 2 all-time highs between 1552 and 1576, rather than just 1 all-time high.

To the upside, the SPX will start to find some selling at 1498/1500 if for no other reason than the index is overbought and the level is considered decent psychological resistance. By the same token, the weekly closing high in the DOW from Dec07 that was broken on Friday and that was the successful retest of the all-time high at 14093 (14198 intra-week) is at 1504 in the SPX (1523 intra-week) and it is likely that level will get broken as well, suggesting the index will once again lead the way up this coming week.

To the downside, the SPX shows no intra-week support of consequence until the 1406 level is reached, which also means that the bulls cannot afford to show any weakness at this time or the bears will likely jump on it. The daily chart does show some support at 1451 and again at 1425/1430 but neither of those levels are considered more than minor or minor to decent at best, especially since a drop back down to those levels would be considered a strong failure to follow through signal.

Most of the important earnings reports in the SPX came out this past week so industry earnings are not likely to be a catalyst this coming week. The earnings reports that did come out were generally better than expected with the exception of a couple where the company itself (not the industry) had problems. As such, the index has "open air" above until the 1500/1523 level is reached without much fear of an earnings report damaging the rally. With no earnings reports of consequence of any kind due out the first 2 days of the week, the probabilities are high that the SPX will continue to lead the rally higher, at least for Tuesday and Wednesday.

Upon reaching the 1525 level, which is 40 points higher above Friday's close, the situation should change and the SPX is likely to start getting the bulk of the selling. Expect higher prices on Monday and Tuesday and then possibly a "reality check" the rest of the week.

The indexes have been on an impressive run to the upside in which resistances of some consequence have been broken suggesting the rally is likely to continue for the next 1-2 weeks. Nonetheless, when the bulk of the earnings reports are out and February comes around, the traders will likely be looking for the seasonal correction to begin. A potential top to this rally is likely to be seen anywhere from the first to third week of February. A drop of as much as 1300 points in the DOW could be seen over the next 2-3 months as that would be considered a "normal" correction in the market.

This coming week there are quite a few earnings reports of consequence due out but the reality is that earnings have not had many surprises in either direction and that means that the traders will likely be looking elsewhere for catalysts. Further upside will likely continue the next couple of weeks due to the momentum gained by the bulls, but with the markets being overbought and at levels difficult to maintain fundamentally, the probabilities of a strong correction occurring soon are high. The traders will need some type of negative catalyst to get things started and that catalyst is likely to be the debt ceiling issue that won't likely be resolved before March 1st, if then.

No economic reports of consequence due out this coming week and with earnings reports generally coming in as anticipated or slightly better, the rally is likely to continue for the next 5 days at least. By the same token, as the index approach the resistance levels mentioned above, volatility is likely to increase. An increase of volatility will be a clear signal that a top will be found shortly thereafter.