DOW Friday closing price - 13895

The DOW continued the recent uptrend closing on Friday near the second highest peak close ever at 13905 and only 170 points form the all-time high weekly close ever at 14065. The index closed on the highs of the week suggesting that further upside will be seen this coming week, at least on an intra-week basis, with 14000 as the main objective. On a possible negative note though, the index is reaching levels of important resistance that will likely require additional positive fundamental news to break above.

It should also be noted, that the DOW is on the 5th rally wave since the uptrend started on Mar09 and using the Eliot Wave Theory, it means the top of the long-term uptrend could be at hand as 5 waves is usually all that is seen before a major correction or new downtrend occurs. In addition, each wave has been weaker than the previous wave with the first wave rally which started on March 2nd 2009 being 4789 points, the second wave being 3262 points, the third wave being 2618 points, the fourth wave being 1618 points, and the current wave being 1424 points so far. It should also be noted that starting from the top of the 1st wave on Apr10, the high to high rally differential (from one rally top to the next) has also been coming down with the first one being 1618 points, the second being 462 points, the third one being 323, and the current one, using Friday's high at 13895, has been 234 points so far. As such, the Eliot Wave theory does suggest that the index will not rally much above Friday's high, certainly not above 13984, as that would make this top to top rally higher than the last one.

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 has rallied for the past 18 trading days and has only shown 3 minor red closes during that period of time. The beginning of the rally was prompted by the resolution of the Fiscal Cliff crisis but the rest of the rally has been a mixture of positive earnings reports, momentum based on short-covering binges after resistance levels get broken, and bullish chart flag objectives generating technical buying. Nonetheless, most of those catalysts/incentives are now over as flag objectives have been reached, short-covering should now be over after 11 of the last 12 days have been green, and last but not least the index is reaching levels where major resistance is likely to be found that will require strong fundamental help to break. As such, the bulls are about to start seeing the bears start to push back, which is not something that has been seen during the last 12 days. By the same token, the selling is not likely to aggressively appear until after some of the important economic reports come out this week.

To the upside, the DOW will find decent intra-week resistance at 13962 and at 14021. Above that level, resistance will be major at the all-time high at 14198. To the downside, the index has not built any support of consequence on the weekly chart until the recent low at 12883 is reached. Nonetheless, on the daily chart, minor support is found at 13500 and a bit stronger support is between 13300 and 13361.

The bulls in the DOW will find themselves between a rock and a hard place this coming week as they face important resistance levels that they cannot overcome with simply momentum and euphoria. In addition, almost every day this coming week an important economic report is due out with the biggies coming out on Friday with the ISM Index and Jobs reports. The bulls also face the fact that no support of consequence close-by has been built on the way up, meaning that the slightest "hiccup" could bring about a fast drop of 200-400 points without chart support buying being seen. .

In addition, the Eliot Wave theory mentioned above does suggest that technical traders will probably start selling as early as Monday as a rally of over 89 points in the DOW (above 13984) would likely weaken their resolve. As such, selling pressure is likely to be seen from the "get-go". By the same token, the index did close on the highs of the week and the probabilities are high that at least a few points above 13895 will be seen this coming week.

The DOW did close at 13895 on Friday and on a weekly closing basis decent resistance is found at 13907. This means that a red close next week will set up 13895 level as a successful retest of that resistance. This is a highly likely scenario as this area is a strong technical selling price point requiring tangible economic improvements to overcome. In addition, technical traders do follow the Eliot Wave theory when price levels within the theory are involved. These are all strong reasons to believe that a top is likely to be seen this coming week.

Nonetheless, If the bulls can overcome the overbought condition and the strong chart resistance levels (as well as the Eliot Wave Theory) and generate further buying of consequence above the all-time highs, then all-hell will break loose and the index will fly into new all-time highs likely to reach 15000 before any new selling of consequence would appear. The probabilities do not favor that occurring, either technically or fundamentally.

NASDAQ Friday closing price - 3149

The NASDAQ continued its recent uptrend but underperformed the other indexes inasmuch as the index only went up .5% this past week whereas the other indexes moved up 1.2-1.8%. In addition, the index has not yet been able to get above its September high where the other indexes are already substantially above theirs. One of the reasons for the underperformance this past week was the strong drop by AAPL after its earnings report and the negative action seen by the tech sector this past week. In fact, if it wasn't for the huge rally in NFLX after its earnings report came out (close to 70% rally from $103 to $173), it is likely the index would have generated a red close. The lack of strong participation by the index does suggest the overall market is not participating strongly in this rally.

The NASDAQ has had some problems during the past 3 weeks inasmuch as the DOW and the SPX have shown green closes on 11 of the past 12 trading days while the index has shown 4 red closes during that period of time. It is evident the NASDAQ is being carried to the upside by the other indexes rather than leading the parade.

On a weekly closing basis, there is very major resistance at 3183. On a daily closing basis, resistance is minor at 3153 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 3130, minor to decent at 3091 and at 3044/3048, minor to perhaps decent at 2988 and decent at 2960.

The NASDAQ could be a key starting on Monday inasmuch as the index did generate a red close on Thursday at 3130 and was unable to close above Wednesday's high daily close at 3153. As such, the index does have 2 close-by daily close levels that could give at least a short-term signal in one direction or the other. A close below 3130 would generate a sell signal that would give at least a 3091 objective, while a close above 3153 would likely take the index up to the 13-year high daily close at 3183. No sell signals whatsoever have been given since the December 28th low daily close at 2960, so a sell signal at this time would certainly deflate the euphoria surrounding the recent rally.

For the last 6 days and since the runaway gap between 3127 and 3130 was closed, the bulls have had an objective of getting up to at least 3178 to close the breakaway gap generated on September 21st. Nonetheless, in spite of the strong rally in the overall market, the bulls in the NASDAQ have failed to accomplish that objective. By the same token, no negative signals have yet been given as the index maintains a clear uptrend with higher highs and higher lows, meaning that the traders will continue to try to take the index higher until some negative chart signal is given.

To the upside, the NASDAQ shows intra-week resistance at 3161 (Thursday's high), at 3171 (spike-high reversal day on October 5th, and at 3195/3196 (double top from September). To the downside, the index shows minor intra-week support at 3124, 3119, 3093, and the most important at 3076. Certainly if the double top at 3195/3196 gets broken, the index will find itself without any resistance to stop further rallies of consequence. By the same token, a drop below 3076 would likely destroy the euphoric mood recently felt.

The NASDAQ did close near the highs of the week suggesting that further upside, above the high of last week at 3161, will likely be seen.

SPX Friday closing price - 1502

The SPX continued 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 generating the highest rally among the indexes this past week at 1.8%. Nonetheless, Friday's close at 1502 has put the index in an area where quite a bit of resistance/support is found from 2007. Between June and December 2007 the index generated 3 decently important weekly closes, either as support or resistance, at 1502, at 1500, and at 1504. With an extremely overbought condition and most of the important earnings reports in the index already out, it will be difficult for the traders to generate another green close next Friday.

By the same token, the SPX did close on the highs of the week and on an intra-week basis no resistance is found until 1523 is reached, meaning that further upside could be seen intra-week this week. It should be noted that the last time the index was at this level was in December 2007 and the first week of December the index had a high of 1510 and closed at 1504 and the very next week the index saw a high of 1523 but generated a close at 1467 and thereafter mostly red was seen. It should be noted though, that at that time the fundamental picture was unraveling and a recession was starting, which is not the case at this time.

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 has been on a tear having generated 8 green daily closes in a row, the first time seen since 2006. The trend is strongly up and with the index closing on the highs of the day/week on Friday further upside is likely to be seen at the beginning of the week. On a negative note, no support whatsoever has been built since the 1451 low seen on January 8th and even that low is considered minor at best. The stronger support is found at the December 31st low at 1398, which turned out to be a successful retest of the 200-day MA, and likely one of the strong reasons this rally has been so strong.

I do want to re-iterate that the SPX has been up to the 1500 level on 2 separate occasions before with 1552 being the high in March 2000 and 1576 being the high in October 2007. The fundamental picture for the financial community is not as positive as it was back in the past as financial institutions now have strong restrictions on what they can do to earn profits, suggesting that there are few fundamental reasons for the index to be able to make new all-time highs at this time. Being at most 5% from a level unlikely to be broken (1576), the traders are now facing a situation that offers a negative risk/reward ratio as a drop back to the most recent low at 1451 (very likely to happen) would offer the same 5% profit for the bears, with potential for a lot more.

To the upside, no resistance is found in the SPX until 1523 is reached. Further resistance from the year 2000 is found at 1530. Above 1530, no resistance is found until 1552, which is considered strong as it was the high in the year 2000 as well as a strong high on July 2007. To the downside, the index does show some minor intra-week support from 2007 at 1485, minor support at 1451, minor to decent support between 1435/1439, and strong support between 1400 and 1405.

The SPX has now generated 8 green days in a row as well as 4 green week closes in a row. Any red day would slow down the rally and any red week would likely signal the top to the rally. Nonetheless, for this coming week, the 1481 and 1503 levels are the ones the traders will watch as a break of either level will likely bring about further movement in that direction. Probabilities favor a rally up to 1523 with a low around 1499, likely to be seen on Friday, with a red close near the lows of the week likely around 1500.

The indexes have been on an impressive run to the upside that has not yet seen any selling of consequence appear. Nonetheless, the indexes are reaching levels of previous strong resistance which are likely to generate enough selling to stop further rallies, at least until such a time that "new" positive fundamental information come out.

This coming week does have important economic reports with Durable Goods due out on Monday, pending Home Sales, Consumer Confidence, and the 20-city Case-Schiller index due out Tuesday, GDP Adv and FOMC rate decision due out Wednesday, Personal Income and Spending as well as Chicago PMI due out Thursday, and the important Jobs report, ISM Index, and Michigan Sentiment due out Friday. This powerful cocktail of economic information will likely be a strong catalyst to the market from which the traders are likely to decide on a direction for the next 4 weeks at least, if not more. In addition, the debt ceiling and sequestration issues are likely to take center stage in the minds of the traders starting at the end of the week, especially since no other earnings or economic reports of consequence will be seen until that issue comes up for voting on March 1st.

The economic reports this coming week will be very important as the attention will turn to the economy and not to earnings starting on Monday. By the same token, there is no reason to believe that the economy is on the way to a "robust" recovery so the economic reports are not likely to be of great help to the bulls. If the reports come out as expected, the overbought condition will likely cause profit taking to occur. If the reports come out worse than expected, the disappointment will be palpable, and if the reports come out better than expected they will need to be much much better than expected so generate a break of the all-time highs in the indexes. With 2.5 out of 3 possibilities pointing to lower prices, it is likely that the indexes will start turning lower this coming week.