DOW Friday closing price - 14089

The DOW continued to trade around the 14000 level but once again the bulls were unable to generate a new all-time high weekly close above 14093 in spite of the fact the bulls got a better than expected ISM Index report as well as statements from the Fed that the stimulus program will stay on until unemployment is down below 6%.

The DOW now shows 2 weeks in a row of positive reversals (higher highs and lower lows than the previous week and a close in the green), as well as a close near the highs of the week and only 7 points below the all-time high daily and weekly close at 14093, suggesting that this coming week the probabilities are high that a new all-time high will be made, at least on the daily closing chart.

On a weekly closing basis, resistance is 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 minor between 13970 and 14030, minor to decent between 13860/13880 and decent at 13784.

The DOW did break some decent chart supports at 13850 on Monday and generated a close on the lows of the day at 13784 suggesting further downside would be seen on Tuesday, at least down to 13700. Nonetheless, Fed Chief Bernake talked on Tuesday morning and stated that the Bond buying stimulus program would continue until unemployment gets below 6% and that statement gave the bulls enough reason to stem the selling and turn the index around. Reinforcement of that support was given by the Fed Chief on Wednesday followed by a better than expected ISM Index report on Friday and the bulls were "off to the races" once more.

The DOW closed just 7 points below the all-time high daily and weekly close on Friday and did close near the highs of the day after the index opened lower due to the Asian and European worse than expected manufacturing reports came out. With the better than expected U.S. ISM Index report, the DOW ended up showing a spike type low at 13937 which will likely become a successful retest of the 13784 low seen on Monday if the index goes above Friday's high at 14107 this coming Monday (likely). The spike type low and close near the highs of the day should work as a technical "slingshot" to take the index to close above the all-time high daily close at 14093 as well as break above the all-time intra-week high at 14198. It is evident the bulls need some technical help to take the index into new all-time highs as the fundamentals do not support such an event. Nonetheless, should the bulls be successful in making new all-time highs it will be considered a "statement" that is likely to give traders "new" reasons to buy at these high prices.

On a negative note, the DOW seems to have formed what is called a "megaphone" formation or "broadening top formation" over the past 5 weeks. The Megaphone Top usually consists of three ascending peaks and two descending troughs. The signal that the pattern is complete occurs when prices fall below the lower low. The formation is considered bearish and does suggest that a major top is being formed and that the current uptrend may reverse into a new downtrend. A Megaphone Top is a relatively rare formation. The pattern develops after a strong advance in a stock price and can last several weeks or even a few months. The definition of the megaphone formation fits perfectly with what has happened in the DOW during the past 5 weeks inasmuch as it has come after a strong run up in price and higher highs have consistently been made as well as now showing 2 lower lows at 13860 and at 13784.

The creation of the pattern reflects a period of time when bulls and bears are battling to gain control of the stock. The pattern occurs after the bulls have been charging and driving the stock price appreciably higher. During the formation of the Megaphone Top, however, bears are exerting increasing influence on the stock and causing it to set a series of lower lows. The increasing volatility eventually creates a sense of uncertainty, leads to profit-taking, and deters some of the bulls from making any further commitments. The bears eventually triumph.

If you put the megaphone pattern into the context of it also being at an all-time high resistance level that has yet to be broken and fundamentally has few reasons to break, it does give the bears in the DOW this coming week what could be "double whammy" ammunition that could be extremely powerful and not likely to be overcome by the bulls. It is evident that something powerful and rare needs to happen chart-wise to overcome what has also been a unique (rare) support from the Fed. It should also be mentioned that the negative reversal seen on Thursday came on a spike of volume and the rally seen on Friday ended up with the 2nd lowest volume in 3 weeks suggesting that Friday's rally did not have the kind of buying that is needed to fuel further upside.

The probabilities of the DOW breaking above Thursday's high at 14149 on Monday are high. Nonetheless, getting above the all-time intra-week high at 14198 is another different matter that will require even more help than the Fed and the ISM Index gave this past week.

To the downside, the DOW will show support at Friday's low at 13937. Nonetheless, that support is now considered critical because of the megaphone formation as well as the daily close 7 points below the all-time high daily close at 14093. Any break of the support at 13937 will make the megaphone formation stronger as well as make Friday's close into a "major" double top on the daily and likely the weekly closing chart. On a more sensitive basis, if the index breaks below 14066 it could get the ball rolling down. The 14066 level was a double low built on the 10-minute chart during the last 4 hours of trading on Friday and if broken the momentum to the upside seen that day will likely ebb.

NASDAQ Friday closing price - 3169

The NASDAQ was able to generate a small green weekly close on Friday but not in a way that would signal that a new 13-year high is likely to be made this coming week. By the same token, if the index closes in the red next Friday the green close this past Friday will be viewed as a successful retest of the 13-year high weekly close at 3193, meaning that the green close on Friday may have "fulfilled" the need of a retest of the highs on the weekly closing chart.

The NASDAQ did have a choppy week with the high for the week being made on Monday and the low of the week being made on Tuesday and the rest of the week was basically trading "within" that range. By the same token, the index did close near the highs of the week suggesting that last week's high at 3186 will be broken this week and that the bulls will have a chance of making positive something happen.

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 minor to decent at 3131 and decent at 3116.

The NASDAQ tested successfully the 50-day MA on Monday, currently at 3125, with a close at 3116 followed by a couple of green closes. The successful test of that line should have been enough to re-generate the uptrend and make a new 13-year intra-week high, especially since the DOW was successful in that way, but it was not to be as the bulls were unsuccessful in even getting above Monday's high leaving questions as to the direction for this coming week. The index did close near the highs of the week and the probabilities favor further upside above last week's high at 3186, nonetheless, the bulls should now have difficulty getting above the previous 13-year high at 3196 (3183 on a daily closing basis), likely meaning that the rally at the end of the week will not take the index much farther to the upside.

The NASDAQ has shown that the 3200 level now has to be considered an important (possibly major) pivot point/resistance level having generated a major low weekly close at 3205 in the year 2000 and now 2 important high weekly closes over the past 6 months at 3183 and 3193. Much of what the index accomplished over the last 6 months was due to AAPL, GOOG, AMZN, PCLN and even NFLX but those stocks don't seem to have much upside left in them at this time making it very difficult to believe that the index will be able to continue upward. The NASDAQ finds itself presently "stuck" in a 100 point trading range between 3100 and 3200 that will likely need a catalyst to break in either direction.

The NASDAQ did close near the highs of the day/week on Friday and further upside is likely to be seen this coming week. Nonetheless, the index is facing 2 recent intra-week highs of consequence at 3196 and at 3213 that are not likely to get broken without some fundamental help. A higher high than last week is needed to be seen in order to have a retest of the recent 3213 high. By the same token, if the retest is successful it would mean that the index is ready to head lower, at least on a correction basis.

It should be mentioned that for the first time in the past 5 months the NASDAQ closed out the month (Thursday's close) in the lower half of the months trading range (3105-3213, closed at 3160), suggesting that a monthly correction is now likely to be seen. The index also has a gap in the monthly chart between 3061 and 3076 that has a high probability of being closed because there has "never" been a monthly gap in the index before. Gaps are usually closed and with all the charts seemingly pointing toward a correction starting, the gap is likely to become a magnet this month.

SPX Friday closing price - 1518

The SPX has been treading water the past 5 weeks having generated weekly closes at 1513, 1517, 1519, 1515, and Friday's close at 1518. The charts continue to suggest that the 2000 period in the index is more "in tune" with what is happening this year than what happened in 2007 and the high monthly close in the index in the year 2000 was 1517 and Thursday's monthly close was 1514, which could in turn mean the index has found its monthly closing high and will close in the red at the end of March, if that comparison holds true.

The SPX started showing weakness this past week having made a new 5 week low on Monday but was able to rally after the 50-day MA, currently at 1485, held firm. The rally off of the successful retest of the MA line was expected but now the bulls must prove they can resume the uptrend, above the previous high at 1530, or face a possible successful retest of the highs and the beginning of a correction. The index did close near the highs of the day/week on Friday and the first course of action for the week should be to the upside.

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 at 1502, minor to decent at 1495 and decent at 1487.

The SPX has shown an increase in volatility as of late having seen the average daily trading range climb up to 19 points during the past 9 days compared to 10 points the previous 9 days before that, which does include the biggest trading range day all year of 38 points seen last Monday, which was to the downside. The increase in volatility is a sign that the index is about to change direction and head lower, at least for a corrective phase.

The SPX generated a high daily close the previous week at 1530 which fits in with the decent weekly close resistance between 1527 and 1536 seen in 2000 and in 2007. The probabilities have now started to favor that 1530 close being the high for this move, especially since the index was unable to accomplish what the DOW accomplished this past week, which does suggest the buying interest in this index has begun to wane.

To the downside, the SPX shows support once again between 1495 and 1500 but the Monday's low and close at 1485 has now become much more important as a break of that level would not only mean the bears have taken a measure of control but that the 50-day MA will have been broken. A break of the 50-day MA would mean the uptrend is broken and that further downside, likely down to the 1400-1415 level, would be seen.

Probabilities favor the SPX getting above last week's high at 1525 but failing to go above 1530. Probabilities also favor a red close, perhaps statement-like, next Friday.

The indexes showed lots of volatility the past week suggesting that a top to this rally is near. Nonetheless, the first course of business this coming week will likely be to the upside after the strong rally seen at the end of the week, as well as the close near the highs of the week. It is evident that early in the week some decisions will be made by the traders inasmuch as the indexes are all at levels where movement of any consequence in either direction will likely have traders jumping aboard, especially if it is to the downside as it would be seen as a failure to follow through signal.

Economic reports this week are mostly inconsequential until Friday's Jobs report, which is expected to be very slightly better than last months. Nonetheless, the Jobs report is not likely to have much of an impact to the upside as traders are already expecting improvement. In addition, traders this coming week are likely to be paying for attention to the Sequestration issue which has already begun but has not yet been able to be evaluated fully for the consequences it could possibly bring.

The mixed signals continue between the indexes as the NASDAQ seems to be struggling to go higher, the SPX is trading totally sideways and the DOW is showing signs of wanting to go higher. The mixed signals will not help the bulls gather the kind of concentrated support needed to break the previous all-time highs.