DOW Friday closing price - 15234

The DOW generated a reversal week having made a new 15-week low and then closing in the green and on the highs of the week, suggesting further upside will be seen this coming week. The rally came after the index successfully tested on Wednesday, and for the first time this year, the 200-day MA, currently at 14725. The line is considered an important trend support unlikely to be broken without tangible fundamentally negative news. The rally was helped when parties began to talk about a possible short-term resolution of the Debt Ceiling issue, taking away the only negative news possible.

Once the DOW got above the 15000 psychological resistance level it rallied strongly as no intra-week resistance of any consequence has been built during the past 6 month between 14700 and 15300. Having closed on the highs of the week, reaching the 15300-15340 level on Monday is highly probable unless the Debt Ceiling issue runs into a new snag.

On a weekly closing basis, Minor to perhaps decent resistance is found at 15354, decent resistance is found at 15451 and decent to perhaps strong resistance is found at 15658. Above that level there is no resistance until the psychological resistance is reached at 16000. On a daily closing basis, minor resistance is found at 15318, minor to perhaps decent at 15409 and strong between 15658 and 15676. On a weekly closing basis, support is minor at 15072 and decent to perhaps strong at 14799/14810. On a daily closing basis, minor to decent support is found between 14960 and 14996, decent support at 14776 and decent to strong support at 14659.

The DOW was the leader to the upside this week as the index rallied 1.1%, whereas the SPX rallied .8% and the NASDAQ dropped .5%. The change in leadership does suggest the rally was more short-covering than new buying as the index has been clearly leading the pack to the downside as of late and there has been no news to cause the leadership to change.

The DOW is still dependent to the downside on what is resolved with the Debt Ceiling. Nonetheless, to the upside resolution of the Debt Ceiling should not generate a lot of new buying since the index has labored over the past 6 months in making new all-time highs, having made a high at 15542 in May, 15658 in July, and 15709 in September. Simply stated the index has only been able to generate 167 points to the upside over a period of 6 months, suggesting that a lot more than a resolution of the Debt Ceiling problem is needed to bring in new buying. It should also be mentioned that for the past 6 months the DOW has seen a marked increase of selling over the other indexes, suggesting that the big hedge and institutional fund managers have been liquidating their Blue Chip stock positions rather than holding or increasing their purchases.

To the upside, the DOW will find minor resistance at 15300/15340 but the euphoria that will be felt if the Debt Ceiling issue is resolved is likely to thrust the index higher, either to the May highs at 15542 or the July highs at 15658. As it is, the index has not yet tested successfully the all-time high at 15709 that was made in September and the probabilities are high that this rally will end up being that expected retest. It should be mentioned that the bearish Head & Shoulders formation on the weekly closing chart is still in place and any weekly close above 15451 will negate the formation, meaning that the bears cannot allow the index to rally intra-week "too much" above that level or they will have a tough time getting the index back down before Friday. The charts do suggest the index will rally up around 15542 and stop.

To the downside, the DOW has little support near-by as the only intra-week support found is very minor at 14953 and minor at 14844. Stronger support will be found at 14760 which is where the 200-day MA will be at in a day or two and where previous decent intra-week support from August is found.

The probabilities continue to favor the DOW staying in the same 900 point trading range between 14700 and 15600 that it has been in since May. The traders need new and positive news to generate additional buying and they are not likely to get it unless the earnings quarter that started this past week offers better results than have been seen all year (unlikely). By the same token, if the Debt Ceiling is resolved, there doesn't seem to be any good reason either for the market to head substantially lower. As such, the probabilities favor "more of the same as has been seen previously".

NASDAQ Friday closing price - 3791

The NASDAQ generated a "small weekly close pause" in the uptrend this week having closed in the red but then only by 16 points, meaning that the probabilities are high the uptrend will resume this coming week if the Debt Ceiling issue is resolved (likely). The "small pause" did come attached with an intra-week spike low 169 points lower than the previous week, suggesting that a correction, as well as some of the overbought condition, could have been addressed in just 1 week. With the index closing only 3 points from the high of the week (161 points off of the lows of the week) any further upside this coming week is highly likely to generate a new 13-year high.

The NASDAQ broke and closed below the 50-day MA on Wednesday but the index negated the break on Thursday and confirmed the negation on Friday with another green close. It should be noted that the index has done that twice before this past year (broke and then negated), in April and in June, and on both of those occasions the index proceeded to rally about an additional 400 points before a top was found. With 4000-4200 as a possible upside target, that would fit in well with what has happened in the past.

On a weekly closing basis, minor resistance is found at 3807 and the nothing until minor and old resistance (year 2000) is found at 3860. Above that level, decent to perhaps strong resistance is found between 4234 and 4252. On a daily closing basis, there is very minor resistance at 3807 and minor at 38.17. Above that level there is nothing for the past 12 months. On a weekly closing basis, support is very minor at 3689 and decent at 3589. On a daily closing basis, support is minor at 3774 and a bit stronger at 3761. Further minor support is found at 3715 and at 3692, and decent at 3677.

To the upside, the NASDAQ shows some minor intra-week resistance at 3798 and at 3817 but above that level the index has open air until the 4000 level is reached. To the downside, the index shows minor intra-week support between 3745 and 3753, minor to perhaps decent at 3734, and then nothing until 3650 is reached. It should be noted that the 50-day MA is currently at 3700, suggesting that line could be support as well.

The NASDAQ gapped up on Thursday between 3702 and 3721. The same kind of a gap occurred the previous time the 50-day MA was broken in June and on that occasion a second gap was seen 10-days later when the index made a new 13-year high. With the previous high at 3817 so close by, it is likely that a second gap will be seen this coming week (not take so long to generate). By the same token and on a negative note, the gap will become a magnet if the bulls are unable to make a new high this week. As such, the bulls are committed to making a new high because if the gap is closed the chart outlook would change as the rally will be seen as a successful retest of the highs, suggesting a top to the rally has been found and the chart fulfilled.

The NASDAQ has the easiest path to the upside this week as most of its key stocks are also showing bullish chart patterns that suggest further upside. For example the AAPL chart, which is 13% of the index, suggests the stock will be seeing strong upside this coming week, which in turn would support the index going higher. PCLN, NFLX, and AMZN are also looking like further upside will be seen, meaning that it will be difficult for the bears to gain traction to the downside without negative fundamental news.

SPX Friday closing price - 1703

The SPX had a classic reversal week having made a new 5-week low but then closing above the previous week's high and on the highs of the week, suggesting further upside will be seen this coming week. The index rallied 67 points off of the lows of the week, meaning that an additional 26 points to the previous all-time high at 1729 would not be difficult to achieve if no negatives come out.

The SPX will be receiving the brunt of the financial earnings reports this coming week with C reporting Tuesday, BAC, AXP, and USB reporting on Wednesday, GS on Thursday, and MS on Friday. Already WFC reported earnings on Friday and the report was slightly better than anticipated. If that trend continues this week, it will give ammunition to the bulls to keep the index moving higher. By the same token, any big disappointment in earnings could prevent the bulls from getting up to the all-time high and/or breaking it. With most of the earnings reports due out Wednesday or later, it is likely the traders will follow whatever the other indexes are doing.

On a weekly closing basis, there is strong resistance at 1709. Above that level there is no resistance. On a daily closing basis, there is decent resistance at 1709 and strong at 1725. On a weekly closing basis, support is minor at 1690 and minor again at 1667. Below that level, minor to decent resistance is found at 1632 and decent at 1592. On a daily closing basis, support is minor to decent and copious between 1676 and 1685. Below that level, there is decent support at 1655, minor at 1650 and 1642, and decent again at 1630.

For the past 5 months, the SPX has been on a clearly defined sloping uptrend in which previous highs have been broken by 19-20 points before a correction occurs. The lows of the corrections have also been holding above the previous ones with the last one being 16 points higher than the previous one. As such, the trend is up and at this time and with the SPX likely being the "sane" index and the one that the traders are watching closely, it does suggest that barring any surprises with the Debt Ceiling issue, the trend will continue as it has been recently.

To the upside, the SPX will face minor to perhaps decent resistance right away on Monday at 1709. Above that level though, there is no resistance until 1729 is reached. Even then, the 1729 high stood up because the Debt Ceiling issue became a concern, otherwise the index would likely have moved higher since the day it closed at that price it was on the high of the day. Based on previous history this year, it is likely the 1749/1750 level will be resistance as well (20 points above the previous high).

To the downside, the SPX has little support before Wednesday's low at 1646 is reached. Minor intra-week support is found at 1676. A break of 1646 would change the chart picture and though minor support is found at 1639 and decent support is found at 1627, should 1646 be broken, a drop down to the 200-day MA, currently at 1600, would likely occur.

The probabilities strongly favor the SPX continuing the momentum gained the latter part of the week. The trend is up and the traders are generally bullish on the market, meaning that further upside is likely to be seen this coming week. By the same token, any failure to follow through and make new all-time highs at this stage of the game would suggest a top has been found as a successful retest of the 1729 high will have occurred. Simply stated, it is boom or bust for the bulls right now.

The Debt Ceiling issue is likely to be pushed down the road another 6 weeks, opening the door for the indexes to rally as the earnings quarter begins. The indexes continue to give mixed signals with the NASDAQ looking strong, the SPX looking positive and the DOW looking sideways. The market continues to rally off of chaos events being prevented but the only thing that is happening is that the market persists in going higher with a stagnant economy, generating what could end up being a bubble.

Nonetheless, there is little this week that will prevent the market from heading higher. Economic reports are not likely to come out for another week at least if the Debt Ceiling issue is resolved by October 17th and the momentum from last week is likely to carry over this week. The important earnings reports (the ones that can move the market) are not due out until the following week, meaning that there is little that the bears can get hold of to stop the rally.

Other than the Debt Ceiling issue, the big question this week is how high the bulls can take the market before selling is seen again. The answer to that question varies depending on what index is being talked about.