DOW Friday closing price - 15118

The DOW made yet another new all-time weekly closing high but this time with a compelling weekly close above the psychological resistance at 15000, suggesting the index is a runaway freight train that has no end in sight. What was most impressive is that there were no economic or earnings reports this past week to push the index higher, meaning that the bears are in hibernation and that the bulls are in full control.

The DOW has now been on a 17-month uptrend that has seen a move up of 2673 points from the previous minor correction low (6 months ago) and 4740 from the previous major correction low (Oct11). Such a rally has never been seen before as the previous major rally that took the index to the 14198 high in 2007 moved 4490 from the previous major correction low and 2112 from the previous minor correction low, meaning that this particular rally is stronger than the one in 2007.

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 14547 and then nothing until minor support is found again 14093 and again at 13981. On a daily closing basis, support is minor to decent at 14687, very minor at 14599 and minor to decent at 14537. Further minor support is found at 14421.

The DOW is now in a free-wheeling mode as all chart obstacles have been removed. Fundamentally though, the economy is still "muddling" along at a slow pace of growth and further upside will not be easy to accomplish. The slowest period of the year (summer) will kick into action now and the "sell in May and go away" seasonal period still has almost 3 weeks to kick in, leaving questions regarding whether the bulls will continue to enjoy the success they have had.

It should be mentioned that the DOW chart seems to be mimicking the action seen between July 2006 and February 2007. During that period of time the index moved straight up for 7 months and 2112 points from a previous correction of 985 points before generating a new but small correction of 834 points. On this occasion, the index has now moved straight up for 6 months and 2640 points from a previous correction of 1182 points, meaning that the similarities are strong, though on this occasion the point rally has been more. Under "this" scenario, the probabilities suggest the index will continue higher for this month and next, generate a correction (probably of about 1000 points) in July/Aug, and then continue higher the rest of the year and likely topping out in 2014.

The close in the DOW above 15000 this past week opens the door wide for further upside of consequence. The index does show a possible up-trend line using the 2000 high at 11750 and the 2007 high at 14198 that does connect around the 16000 level. It is unlikely the index would go straight up to that line at this time but it is a very viable objective that could be reached by the end of the year.

To the downside and analyzing the DOW through the monthly chart and comparing it to the 2006/2007 rally, it is highly unlikely that the index will go below last month's low at 14434 this coming month. In fact, it is already likely that the low for this month has been set at 14687 as a drop back down to that level now would be considered a negative. In looking at the weekly chart and the fact the index closed on the highs of the week and further upside is expected to be seen this coming week, it is unlikely the index will drop back down and close below the previous high weekly close at 14865. In looking at the daily closing chart, support will be found at 14865 and stronger intra-week support at 14687.

The chart of the DOW is strongly bullish with high probabilities of continued upside. Nonetheless, there are a couple of factors that could cause the rally to derail starting with the fact that fundamentally the economy usually slows down going into the summer and is the reason the "sell in May and go away" adage has been so constant over the years. In addition, in past years the economy was not on the "brink" of a recession as it is at this time. A recession is already in effect in Europe and in China there have been strong signs that a recession could begin as well. In addition, our own ISM Index is barely above 50, meaning that 1 slow month could signal that the economy is contracting and that would put an immediate stop to this one-of-a-kind rally. The market is "totally" dependent on the Fed and that is one factor that cannot be charted. Simply stated, it is difficult to have much confidence in the charts when there are so many factors that are un-chartable.

The probabilities favor the DOW rallying further this coming week. Nonetheless, there are a slew of economic reports due out. starting with Retail Sales on Monday morning before the opening. As such, it is likely the action this week will be dependent on what the reports say.

NASDAQ Friday closing price - 3436

The NASDAQ once again led the rally to the upside having moved up in price 1.7% this past week while the other indexes rallied 1%. The index leading the way suggests further upside will be seen as this has been the index the traders have bought aggressively over the past 5 years when expecting higher prices in the market to occur. The index now finds itself in a new 13-year high and with only minor resistance above until it reaches the 4200 level.

The NASDAQ closed on the highs of the week and further upside is expected. With index showing no previous resistance until the 3480/3535 level, it is likely that the index will continue to lead the way this coming week. It should be mentioned that the resistance at that level is considered minor and old, meaning that the traders will not be anticipating strong selling to occur there if reached. In addition, as long as the index is leading the way, it is unlikely the traders will feel any pressure to sell.

On a weekly closing basis, there is no resistance seen in the last 10 years. On a daily closing basis, there is no resistance seen in the last 12 months. On a weekly closing basis, support is decent at 3202/3206 and minor at 3161. On a daily closing basis, support is minor to decent at 3000, very minor at 3222, minor to decent at 3203, and decent at 3166.

The NASDAQ has had an impressive 16-day run with no pauses being seen and with the index closing on the highs of the week on Friday, further upside is expected. The index has now shown a green close on 13 out of the last 16 days, a rally so far of 282 points, and only one day when the index went below the previous day's low. The index had a similar rally at the beginning of the year when it rallied for 35 days and 262 points but that rally pales in comparison as the index had many red close days, many lower-than-the-previous-day lows and a much longer time frame to accomplish. The time frame and scope of this rally does suggest that it could be an "exhaustion" rally where a correction of consequence will occur once a top has been found, especially since fundamentally things were better at the beginning of the year than they are now. The big question is how much more will be seen before the top is found.

To the upside, the NASDAQ does show some intra-week resistance at 3535 (3483 on a weekly closing basis) but that resistance is from the year 2000 and it was from a small bounce in a falling index market, which makes the resistance much weaker. Much stronger resistance is found between 4000 and 4200 which was a high seen from a strong 2-month short-covering rally but the probabilities of the index getting up to that level at this time have to be considered low. With the index having closed on Friday at 3436, it does suggest that some chart selling might be seen starting 50 points higher.

To the downside, the gap area in the NASDAQ between 3344 and 3370 will now act as minor to decent support. Closure of the gap with a drop down to 3344 will likely cause the index to drop down to at least the 50-day MA, currently at 3270. The 3270 level does offer additional support due to the multiple highs seen in March between 3260 and 3270. By the same token, a weekly close below 3300 would now give a failure to follow through signal, likely putting the index at risk of a stronger correction.

It is very clear that the NASDAQ is presently the index the traders are following, both fundamentally and chart-wise. The index is in a "runaway-freight-train" category and with only minor and old resistance above to stop the run the possibilities are high that if more positive economic reports come out that the index will run a whole lot more. By the same token, this coming week there are quite a few economic reports and the index is nearing "some" resistance and facing an extremely overbought condition, suggesting that the slightest negative could cause the index to stop the rally. A drop back down to 3370 seems highly likely to occur once a pause begins but a drop down to 3344 would likely suggest stronger consequences. Probabilities favor further upside with the 3500 area as a likely objective for this coming week.

SPX Friday closing price - 1633

The SPX continued its impressive run into new all-time highs now vaulting above the previous high at 1576 by more points than it did when it broke the 2000 high in 2007. The action seen does suggest the index is now in a more bullish situation than was seen in either of those 2 occasions and that further upside, perhaps of consequence, will be seen.

The SPX has now been in a 6-month rally totaling 198 points to the upside with only 6 of the last 26 weeks generating a red close and none of the red closes being of consequence (all less than 30 points). The index has increased in value by 14% during this time and there is still no end in sight.

On a weekly closing basis, no resistance is found above. On a daily closing basis, no resistance is found above. On a weekly closing basis, support is now decent between 1553 and 1555, very minor at 1515, and minor to perhaps decent at 1500/1503. On a daily closing basis, support is minor at 1582, minor again between 1552 and 1553 and strong between 1541 and 1545.

It should be mentioned that the SPX has been trading above the 50-week MA for 12 months and above the 50-day MA for the past 6 months but this past week the index matched the highest differential between the line and the price seen since March 2009 at 190 points when the index was 185 points above the 50 week MA and 65 points above the 50-day MA. The highest differential on the weekly chart was seen in March 2009 at 190 points when the index was rallying aggressively from the multi-year low seen from the last recession. The "average" weekly differential at the peak of a rally, seen during the last 20 years, has been around 160-170 points. Having gotten this past week to that kind of differential, it does suggest that the index will either start trading sideways, coming down, or slowing its rate of ascent as the MA's lines catch up.

To the upside, the SPX shows no resistance whatsoever so anything is possible. To the downside, the 1600 level is considered psychological support now and likely to be tested once or twice before the traders get aggressive to the upside once again. Short-term daily close support is at 1582 and then important support at 1541.

The SPX is now in a situation where the traders are likely to be paying more attention to what the index does not do than what the index does. Chart-wise, the SPX should continue higher for all the reasons mentioned above, as well as from the fact that as long as the Fed and the Central banks continue to print free money, there will be little reason to sell aggressively. If the index does not go higher, the traders will begin to wonder "why".

The indexes could now be in a "runaway freight train" classification as there seem to be no fundamental obstacles the bulls cannot overcome. Bad economic news has only caused very minor corrections or pauses and good news has stimulated strong rallies. In addition, the bulls have now been able to break convincingly above the 15000 level in the DOW and that means the bears have no level they can concentrate their efforts to stop the rally. The NASDAQ is now the index they will watch this week as there is some previous resistance between 3483 and 3526 but that is still 50-90 points higher and therefore unlikely to offer any resistance at the beginning of the week. The breakout in the DOW above 15000 will need to be confirmed this week and there are a slew of decent economic reports due out that could, as a whole, put a brake on the rally. By the same token, if the reports come out as expected or better, the runaway freight train is likely to continue.

The market is now in the middle of the "sell in May and go away" adage and there are still a few weeks where that adage can gain traction. Nonetheless, there has not yet been any signal that selling is occurring and the bulls are not likely to "jump the gun" when everything is going their way. Negative reports and negative action are now required before any selling is seen.

By the same token, there are a slew of economic reports this week that could generate direction, starting with Retail Sales on Monday, PPI and Empire Manufacturing on Wednesday, CPI, Initial Claims, Philadelphia Fed and Housing information on Thursday and Michigan Sentiment on Friday. The traders did not have any reports to lean on last week and therefore there is a definite possibility that the reports this week could have an impact.