DOW Friday closing price - 14578

The DOW made another new all-time high (intra-week and weekly close) and closed on the highs of the week suggesting further upside is likely to be seen. All economic reports this past week were better than expected suggesting the economy continues to expand even though slowly. With no resistance above, it seems unlikely that the bulls will stop buying until some negative catalyst is found.

The DOW has now rallied 2114 points since the last meaningful correction of more than 800 points and that has only been surpassed twice before in the last 10 years and both times it was when the index was rallying from recessionary lows. The previous 3 rallies not off of recessionary lows were 2112, 2032 and 2107 points, seen in 2006, 2010, and 2011. The higher rallies were in 2009/2010 when the DOW rallied 2408 points from the 6469 index low and 2642 points from the first correction index low at 8088. Off of these numbers it would be fair to assume that the index is near or at a high for this rally as the recessionary lows rallies cannot be compared. On the other side of the coin, never has a rally off of these Fed supported conditions been seen before, making even this numerical assumption doubtful.

On a weekly closing basis, there is no resistance above. On a daily closing basis, there is no resistance above. On a weekly closing basis, support is minor at 14093 and again at 13981. Below that, there is no support until minor support is found at 12938. Decent to strong support is now found at 12588. On a daily closing basis, support is very minor at 14452 and minor at 14421. Below that level, support is minor to decent between 13970 and 14030.

The action in the DOW during the last 14 trading days suggests it is in the same kind of a pause like the one seen 8 weeks ago in which the index traded sideways the first couple of weeks in a 170 point trading range which then expanded on each side into a 300 point trading range before breaking out 3 weeks ago and generating this latest rally. If the index is in the same pattern and using the same parameters as seen the last time, the 14585 high seen on Friday (or maybe 15-20 points higher) should be the upper parameter of this rally with 14280/14300 becoming the downside objective for the next part of the expanding cone.

Though the DOW closed on the highs of the week and further upside is expected to be seen on Monday it does need to be mentioned that on Monday at 10:00am the ISM index report is due out and that report can be a fundamentally catalytic. The ISM index has been in a 2-year downtrend since February 2011 when it reached a high of 60, having come down consistently to reach a low of 49.7 just 3 months ago. The 50 level is a major pivot point as it means the line between growth and contraction in the economy. The ISM index has moved up the last 3 months to last month's 54.2 reading. It is expected that the index will come out at 54.5 on Monday. It should be mentioned that the ISM index has not been above 54.5 for the last 18 months and that probably means the 54.5 level is considered resistance on the chart as well as a level that may predict whether the DOW continues higher or not. A better than expected ISM index number (above 54.5) should generate new and additional buying in the DOW, while a lower than expected number could cause profit taking to occur.

To the downside, the DOW shows multiple-intra-day-lows support between 14382 and 14404, which is considered minor support. If broken, no support is found on the daily chart until the 50-day MA, currently at 14100, is reached. Previous high daily close support of consequence is found at the 14000 demilitarized zone. Using the intra-day chart, the 200 60-minute MA is currently at 14285 and it is unlikely that the index would break below that line without some negative fundamental news. In addition, the 14300 level is considered "general" support as 300 points above a major even number (such as 14000) is often used by the traders as a support area.

This year, since December 31st, the DOW has shown a pattern of rapid and strong appreciation for 2-3 weeks followed by a pause/sideways pattern lasting at least the same amount of time. The end of the sideways pattern in February was distinguished by strong volatility the last 5 days of the pattern, followed by a new rally. The kind of volatility seen the last time at the end of the last sideways pattern has not yet been seen on this occasion, suggesting that further sideways action is probable at this time. By the same token, if volatility starts to be seen this week (perhaps after the ISM Index report) then the sideways channel parameters (14585/14600-14280/14300) will need to be watched closely as a break of either of those levels will likely mean a new rally or the beginning of a correction.

Several scenarios are possible this week due to the fundamental picture at this time. The Cypress banking problem will likely come to a clear "head" this week with the positives or negatives defined. The ISM Index will also give a better idea whether the economy is still continuing to recover from the diminishing growth seen the last 2 years or whether the last 3 months were simply a pause in a deteriorating growth pattern. In addition, the Jobs report will come out on Friday which will signal whether the recent drop in unemployment will continue or not. For all of these reason, and the fact the market continues to be strongly overbought on the weekly chart, this coming week should help determine what the DOW will do in April. The probabilities favor further upside as April has generally been a positive month in the past.

NASDAQ Friday closing price - 3267

The NASDAQ was able to break above the possible double top at 3260/3263 that had been built (but not confirmed) over the past 3 weeks. The index closed once again in a new 13-year high and on the highs of the week suggesting that further upside will be seen this coming week. On a positive note for the bears, the up-trending channel that has been mentioned in the last few newsletters as a possible top to this rally was not broken as the top of the channel was at 3270 this past week and will be at 3275 this coming week. As such, it is possible that the index will move higher this week and that the channel will still suggest that the next move of consequence will be to the downside.

On a positive note, the NASDAQ was able to shrug off the move down in AAPL, GOOG, and PCLN this past week suggesting the traders are re-allocating funds into the other stocks that may still be depressed in price. Re-allocation is a bullish statement as it means money is flowing into the market in general and not only into specific popular stocks.

On a weekly closing basis, no resistance is round until 3451. On a daily closing basis, no resistance is found during the past 12 months. On a weekly closing basis, support is very minor at 3244 and minor at 3183 and at 3161. On a daily closing basis, support is very minor at 3242, minor at 3229 and minor to perhaps decent at 3222. Below that there is minor support between 3183 and 3200, minor to decent at 3131 and decent to strong at 3116.

On Friday, when the NASDAQ broke above all the resistance built during the past 3 weeks, the "minor" sell signal given last week was negated, suggesting the index may be starting a new leg to the up-trend. By the same token, the up-trending channel that suggests the next move of consequence will be to the downside is still in place in spite of the fact the recent 3rd point in the channel was negated with Friday's rally. It should be explained that the 3rd point in the line (established 3 weeks ago) was never confirmed as no strong sell signal was given thereafter. The channel is back to being a 2 point line (less indicative) but still viable. An intra-week drop below 3240 as well as a daily close below 3254 any day this week will make last week's high into a valid and confirmed third point on the line.

To the upside, the NASDAQ has no previous intra-week highs near-by, meaning that only the channel line can be used as a possible resistance area. The next intra-week resistance area is at 3451. To the downside, the NASDAQ has minor support levels at 3227, 3222, and at 3217, any of which if broken would slightly weaken the chart. Nonetheless, the most important close-by support level is at 3200/3205 which represents a successful retest of the runaway gap between 3182 and 3200. Closure of that gap, especially after it has been retested successfully, would likely signal that a correction of consequence has begun.

The probabilities favor the NASDAQ moving higher as a 2-point channel is not something the bears can rely on to stop further upside, especially with no previous chart resistance and fundamentals improving. By the same token, it is the NASDAQ that is most likely to give the "first" sell signal should a top be found as just a drop of 85 points from Friday's close would be strongly indicative that a correction of consequence has begun. The other indexes do not have any close-by support levels that would give the same signal.

SPX Friday closing price - 1569

The SPX made a new all-time high daily and weekly close on Friday, breaking above the previous high daily close at 1565 as well as above the previous high weekly close at 1561. The index closed on the highs of the week and further upside is expected to be seen with the all-time intra-week high at 1576 likely to be the target for Monday.

On a possible negative note, the SPX made a new all-time high in 2007 going above the previous all-time high at 1552 (seen in 2000) by 24 points. Nonetheless, there was no follow through in 2007 as the very following week after the new high was made the index fell generating a failure to follow through signal that ended up causing the index to fall 58% in value (900 points) over the next year. It cannot yet be said that the fundamental situation is much better than in 2007 as the banking industry in Europe is and has been on the verge of collapse for some time, suggesting that this new high is speculative and iffy at best.

On a weekly closing basis, there is no resistance above. On a daily closing basis, there is no resistance above. On a weekly closing basis, support is very minor at 1556 and again at 1515. Below that level, minor to perhaps decent support is found between 1500 and 1503. On a daily closing basis, support is minor at 1548 and at 1545. Below that, very minor support is found at 1530 and minor to perhaps decent between 1495 and 1502. Decent support is found at 1487.

Having made a new all-time high daily and weekly close, the SPX needs to show follow through to the upside this week or face a failure signal of consequence. It should be mentioned that the 1552-1576 level has been strong intra-week resistance for 13 years and the bulls need to show the ability to take the index substantially higher to prove that the same resistance will not bring about the same result as seen twice before. Having made a new all-time high does bring about a lot of responsibility to the bulls as they have to immediately "prove" that the new highs are warranted, much like what the DOW has done by moving up an additional 400 points above its previous all-time highs.

Many analysts have stated that the SPX should see 1600 on this rally and 1700 by the end of the year, which means that anything less than 1600 would likely be considered a failure. The 1600 level does make sense inasmuch as the previous high from 2000 was broken by 24 points in 2007, which would mean the 2007 high at 1576 should be broken by "at least" the same amount this time around.

To the downside, the SPX shows minor intra-week support at 1551 and at 1543. Stronger support will be found at the low seen 2 weeks ago at 1538 (1545 on a daily closing basis). A break below 1538 would give a sell signal that would also be considered a failure to follow through signal should the index close below that level as well.

The intra-week parameters for this week are quite clear in the SPX. To the upside the 1600 level is a viable upside objective while to the downside the 1538/1545 area is important support. Having closed at 1569 on Friday it seems that there is "wiggle" room of 30 points to each side, with 1569 being a probable important pivot point. Probabilities favor the upside.

Economic reports were generally better than expected this past week and the bulls took advantage of them to make new highs. The mood in the market is presently strongly bullish since there doesn't seem to be any other place where investors can get a better return on their money, in spite of the high prices seen right now. Problems in Europe continue to be addressed positively, increasing the belief that the European Community will be able to solve their problems without a major breakdown along the way. Simply speaking, there are few clouds in the sky at this time suggesting the sun will keep on shining on the bulls.

Nonetheless, this coming week does have some important economic reports that could bring about darker clouds if reports are worse than expected, especially in the manufacturing area. The ISM Index report comes out on Monday and though the index has been climbing positively the last 3 months it does find itself at an area that for the last 18 months has not been broken and if it comes in worse than expected the traders are likely to take profits and wait for the next report to consider buying again. The Jobs and Unemployment reports come out on Friday and both of those came in much better than anticipated last month, suggesting a trend has begun. If that trend is not confirmed with yet another improvement in the numbers, it too could cause the traders to take profits, especially at these high, overbought, and chart important levels.

It should also be mentioned that more information will be known this coming week regarding the debt and banking problems in Cypress. There are no possibilities that the news from Cypress would be considered beneficial to the market but there are several scenarios that could be considered negative for the market should they occur. As such, the market is going to be very sensitive to the news that comes out this week.