DOW Friday closing price - 16478

The DOW continued to surge forward having generated an additional 257 points above last week's close and a total of 1810 points since the last correction of consequence ended the first week of October. The biggest rally without a correction in the past 7 years has been 2464 points so further upside is certainly possible. The index closed near the highs of the week and further upside is expected to be seen this coming week as no signs that the traders are ready to sell has been seen yet.

This past week the DOW plowed convincingly through the general resistance normally found 300 points above an even number, such as 16300 is, and now there is no closeby price level above where the bears can gather to make a concerted effort to stop the rally. The index is in a "runaway-freight-train" mode and some catalyst will likely need to occur to stop the momentum that has now been gathered.

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 15755, minor again at 15072 and decent to perhaps strong at 14799/14810. On a daily closing basis, very minor support is found at 16097, minor at 15821 and decent at 15739.

It can be said that the rally in the DOW was more about a lack of participation by the bears than anything else as December has historically been an up month with a large contingency of traders on the sidelines awaiting the beginning of the year to participate. With good economic news having come out this past month, the bears have been mostly noted by their absence.

It does need to be mentioned that the VIX got down to 11.69 on Thursday and that is the 6th time this year that the index has been below 12.00 and on every single occasion previously the DOW ended up having either a correction within a few days thereafter or a sideways trend for a week or two. With the DOW having generated a red close day on Friday, 1 day after the 11.69 low was seen, it does suggest that further upside this coming week will be very limited if any is seen.

Technically speaking, the DOW did generate a reversal day on Friday having made a new all-time high and then closing in the red. Nonetheless, it is difficult to put much value on the red close reversal since it was only by 1 point and came on a day where participation was extremely low. By the same token, considering what the VIX did as well, it could end up being a sign that the market may be ready to correct or at least go sideways until the beginning of next year when the next set of important economic reports come out, as well as when the debt ceiling issue is up for discussion again.

To the upside the DOW has no resistance levels to mention. It is literally open air above. To the downside, the index shows minor support at last week's low at 16225 and a bit more important, but still somewhat minor, at the previous all-time high daily close at 16097. By the same token, a daily close below 16097 would give a failure to follow through signal that could generate further downside with the 50-day MA, currently at 15865, as the objective. That level is further supported by an intra-week low seen at that price on November 20th. The most important support is the recent low at 15703 from which this latest rally began from.

The outlook for the DOW this coming week is for higher prices above last week's high though how much and when is not clearly defined. On Tuesday there are 3 economic reports of some consequence (20-city Case/Schiller index, Consumer Confidence, and Chicago PMI) and on Thursday the always important ISM Index comes out. Based on these reports the traders are likely to make their decisions. Nonetheless, based on the year 2000 when the high for the year was made on January 14th, I would anticipate that the index will go above this month's high at the beginning of the year, probably on Thursday after the ISM Index report comes out and then sometime within the first 2-3 weeks of January the index will begin a correction.

NASDAQ Friday closing price - 4156

The NASDAQ extended its recent rally closing above a weekly close resistance from the year 1999 at 4069 and proceeding to close in the upper half of the week's trading range, suggesting further upside above last week's high at 4175 will be seen. Nonetheless, the index is nearing an area of resistance between 4200 and 4300 that is likely to offer strong resistance, probably more than seen this past year, and where profit taking is likely to be seen. This scenario is supported by the fact that less stocks in the index are making new highs than were being seen in October even though the index is appreciating at a faster pace than then. It is evident the bulls are finding fewer stocks at price levels of interest to buy.

The NASDAQ generated a weekly gap this past week between 4111 and 4127 that did not get closed by the end of the week and that is something that has not happened even once in the last 10 years. It does suggest that a rapid acceleration to the uptrend is occurring and if that is the case the end result would be an exhaustion run that would signal a top to this rally.

On a weekly closing basis, decent to perhaps strong resistance is found between 4234 and 4246. On a daily closing basis, there is no resistance above for the past 12 months. On a weekly closing basis, support is minor but indicative at 4000, very minor at 3919 and at 3791, and decent at 3589. On a daily closing basis, support is minor at 4068, minor to perhaps decent at 3993, and minor at 3985. Below that level, support is decent at 3857.

The NASDAQ has now accomplished making the 4000 level into an important support/pivot point having tested that level successfully over the past few weeks and now resuming the uptrend. It is unlikely that the 4000 level will be broken to the downside before further upside, likely to be up to the 4250-4300 level intra-week, is seen. Nonetheless, the 4250-4300 level represents the first truly strong resistance area found since 2800 was broken in February 2012, meaning that the probabilities of going above that level any time soon are minimal at best. The probabilities now favor the index trading within the "general" support/resistance levels between 3700 and 4300 for at least the next 3-6 months if not longer. By the same token, the probabilities do favor the upside of that trading range being seen first.

To the upside, the NASDAQ shows minor resistance at 4192, decent resistance at 4259 and decent to strong resistance between 4289 and 4303. To the downside, the index shows support at the 4000 demilitarized zone (3970-4030) which is also supported by 50-day MA that is currently at 3990. Further support is found at 3911 and at 3855, which if broken would likely cause the index to drop down to the 200-day MA, currently at 3630 but moving up fast. It should be mentioned that the 50-day MA has been tested successfully 4 times during the past year and only broken the 2 times when the index dropped down to the 100-day MA. With the fundamentals and momentum being strong at this time, it is unlikely that the line will be tested or more unlikely to be broken until some selling interest of importance is seen.

The NASDAQ did generate a key reversal on the daily chart on Friday, having made a new 13-year high and then closing in the red below the previous day's low. The reversal could be considered indicative but since the other indexes did not have such an event happen it is still suspect. Nonethlesss, the index has been the leader as of late and therefore a key reversal is likely to mean something. In addition, 4 of the 6 main stocks in the index (PCLN, AMZN, NFLX, and AAPL) had negative days as well, and it is those 6 stocks that have been mostly supporting the rally. The charts of those 4 stocks do suggest that further downside will be seen, which in turn could mean the index will not follow through to the upside as the weekly chart suggests.

The key this week for the NASDAQ will be last week's low at 4127. A break below that level would likely suggest that the gap will be closed and in turn indicate that the rapid acceleration is over. A break above 4175 would likely suggest that at least 4192 will be seen.

SPX Friday closing price - 1841

The SPX extended its rally with a new all-time high at 1844. With no resistance or formulaic chart objective above, as well as a close near the highs of the week, the index is likely to continue higher this coming week. The previous 2 all-time highs in the index were 1553 and 1576, likely suggesting that the mid to 2/3rds point of the 1800-1900 trading range is likely to draw some selling interest.

The SPX did "technically" generate a reversal day on Friday having made a new all-time high but then closing in the red, possibly suggesting that further downside will be seen at the beginning of the week. Nonetheless, the reversal was not very convincing as the index barely closed in the red on Friday, meaning there was no conviction among the traders that further downside will be seen on Monday.

On a weekly closing basis, there is resistance above. On a daily closing basis, there is no resistance above. On a weekly closing basis, there is minor to perhaps decent support at 1775, minor support at 1690 and minor again at 1667. On a daily closing basis, support is very minor at 1808, minor at 1885 and 1881, and minor to perhaps decent at 1775. Below that level, there is minor but indicative support at 1747.

The SPX has now generated 7 days in a row of higher lows, as well as a rally of 77 points since the 50-day MA was tested successfully. The previous time the 50-day MA was tested successfully was in April and on that occasion the index rallied for 6 days in a row of higher lows and generated a rally of 151 points over a period of 5 weeks before a new correction was seen. It is evident based on past history that the traders will continue to push higher until some catalyst is found that can stop the momentum.

To the downside, the SPX shows no support whatsoever until the 1800-1808 level is reached and even then that support is from previous highs and not considered much more than minor in nature. Stronger support is found down around the 1777 level which does include the 50-day MA, currently at 1785. As such, the bulls are faced with a scenario that offers quite a bit of risk with a possible downside move of over 55 points seen before a dependable support level is reached. With no better than a 1-1 risk/reward ratio available if the index goes up to the next psychological resistance at 1900, it does mean that the bulls must keep the momentum going if they want to keep the buying interest strong.

The key this week in the SPX is last week's low at 1822. A drop below last week's low would suggest the momentum has stopped and that a spike top may be in place.

The traders did not find any reason this past week to sell or take profits as it seems the bears are in hibernation. The momentum is still strong to the upside, though likely due to a lack of participation rather than additional reasons for the market to continue higher. Nonetheless, this coming week there will be economic news that the traders will likely key on as the 20-city Case/Schiller Index, Consumer Confidence, and Chicago PMI are due out on Tuesday and the ISM Index due out on Thursday. All of these reports are considered relatively important and there is a possibility that the traders will make some decisions for the year at the beginning of the year which is on Thursday when the ISM index report comes out.

With increasing difficulty finding stocks that are still considered low in price and with attractive PE ratios, the traders may find that taking profits at the beginning of the year is the intelligent thing to do, especially since the Debt Ceiling issue will once again be in play mid-month and that is certainly not something that is presently considered a positive. It should be mentioned that the earnings quarter will start on January 9th with AA reporting that evening and that there is a seasonal tendency to see a correction in the market beginning sometime in the first quarter with most of the previous seasonal corrections starting either by mid January or early February.

One additional factor that could be in the minds of the traders in 2014 is that the previous all-time high in 2007 was made 7 years after the 2000 all-time high was made, meaning that if the pattern repeats (7 years between major tops), that 2014 could see a major top made. With the top in the year 2000 occurring in January (January 14th to be exact), if the pattern repeats it could mean that sometime in the first 2 weeks of the month, the high for the year will be made.