DOW Friday closing price - 16154

The DOW has seen 2 weeks in a row of gains in excess of 400 points (454 and 421 points) in which 75% of the 1248 point loss seen the previous 5 weeks has now been made up. Nonetheless, the rally was expected to occur since the index got down to the 50-week MA 2 weeks ago and held that line, meaning that chart-wise a rally to retest the highs was expected to happen before further consideration to lower prices could occur. The only time in the last 18 months that the 50-week MA had been broken for more than 1 week was when the index generated a 19.6% correction, as such it was not expected the line would be broken the first time down.

The DOW closed on the highs of the week and further upside above last week's high at 16175 is expected to be seen this week. Nonetheless, the upside gains are not likely to mimic what has happened the past 2 weeks since the index is reaching the area of resistance between 16174 and 16257 where bear traders expecting a stronger correction to occur are likely to "step up to the plate". Case in point is what happened in May/July 2011 when the index made a new multi-year high in May, corrected 7.2% during the next 7 weeks and then retested the previous high before embarking on a 12 week correction that took the index down 19.6%. With the index correcting 7.6% over the past 5 weeks and now rallying to retest the highs (the same as in 2011), the possibility is elevated that this rally is simply a retest of the highs and that a stronger correction is to come.

On a weekly closing basis, there is strong resistance at 16458/16478. On a daily closing basis, there is minor resistance at 16257, decent at 16481 and strong at 16576. On a weekly closing basis, support is minor to perhaps decent at 15698, minor at 15665, minor again at 15072 and decent to perhaps strong at 14799/14810. On a daily closing basis, there is minor support at 15739, minor again between 15658 and 15676, and then nothing until the now decent support at 15372.

The DOW saw very little selling interest this past week, having generated green closes on 4 of the past 5 days and the red close day was minimal. With the index having rallied now 745 points over the past 8 trading days and mostly in a straight up manner, the bulls are highly at risk that if selling interest is found that a fast-move down will occur, that the retest of the high will be successful, and that a new leg down in the correction has started.

It is important to note that the rally in the DOW the last 2 weeks has not run into any previously built area of strong resistance, meaning that the rally was mostly chart momentum due to the lack of resistance on the chart with selling resistance of consequence not expected to be found. Nonetheless, selling interest is expected to be found between 16174 (intra-week spike high seen in November) and 16257 (4-week spike low daily close seen in January). Both of these resistance levels are meaningful inasmuch a previous high of consequence will always generate selling interest, especially when combined with a previous 4-week daily closing low that when broken generated a sell signal. A daily close above 16257 would mean that the sell signal has been negated and in turn that would likely mean that a new all-time high would be made. As such, this area of resistance can be considered "pivotal". Any red daily close this week (prior to a new all-time high daily close) will now suffice to signal that a successful retest of the all-time high has occurred, as well as of the sell signal given. This scenario will put a lot of pressure on the bulls since they will need to keep the momentum and green closes going every day of the week until a new all-time high daily close is achieved. Anything less than that will be considered a failure. With an additional 434+ points to the upside needed for a new high to occur, and no economic reports of consequence scheduled that could work as a positive catalyst, the probabilities do not favor that scenario happening.

Though any red daily close this week in the DOW would be negative to the bulls, a break below Thursday's low at 15863 would be an additional sell signal that would likely generate strong selling. By the same token, in looking at the intra-day 10 minute chart, the bottom of the demilitarized zone at 15970 does look like a trigger point as well. In fact, psychologically if the index gets below 15970 it will be considered a win for the bears and a loss for the bulls.

Based on everything written above, the DOW is likely to see follow through to the upside on Monday morning with the 15257 level as the likely objective, which would mean the index would be up about 100 points above Friday's close. From there, the rest of the week will be a coin toss with the probabilities favoring the bears and not the bulls. Simply stated, the burden of proof is squarely on the shoulders of the bulls and any slip-up would likely be indicative that another stronger correction is forthcoming.

NASDAQ Friday closing price - 4244

The NASDAQ made a new 13-year intra-week and weekly closing high on Friday, possibly resuming the uptrend after a 10% correction over the past 5 weeks, as well as a successful retest of the 100-day MA, was seen. Nonetheless, the new high did not bring about any immediate follow through of consequence as the index traded in a narrow 25 point trading range on Friday and only got above the previous high by 4 points (4250 vs 4246), suggesting that there are many questions still being asked.

The NASDAQ did close on the highs of the day/week on Friday and further upside above last week's high is likely to be seen with the July 2000 high at 4289 or the August 2000 high at 4259 as the intra-week objective. It is also possible that the index will get up to 4303 as that was the high made in January 2000 when the index was on the way up to 5132 and just prior to a 2-week drop down to 3748. The 4259/4289 highs were made "after" the 5132 high occurred and the index was bouncing up from a 3042 low. The high on this occasion will likely reflect which of these 2 scenarios is the most likely with 3748 as the downside objective if the index is on its way to test 5132 and 3042 as the downside objective if the index has topped out for the longer term.

On a weekly closing basis, decent to perhaps strong resistance is found between 4234 and 4246. On a daily closing basis, there is no recent resistance above. On a weekly closing basis, support is minor at 4103 and decent at 4000. Below that level, there is minor support at 3919, and at 3791, and decent at 3589. On a daily closing basis, support is minor at minor to perhaps decent at 4113, minor at 4051 and decent at 3996/3998.

The NASDAQ is likely to have a very indicative week ahead since the index has resumed the uptrend having made a new 13-year high this past week. The new high requires follow through of consequence in order to generate the new buying that is needed to push the index above the old but important resistance levels seen in the year 2000. Keep in mind that since the index got above the 3000 level there has not been "any" previous resistance areas of consequence until now, meaning that this is the first time in the last 13 months that the bulls will need to "prove" their ability to take the index above a resistance area of consequence. The last time that occurred was in March 2012 when the 3000 level was the resistance that needed to be broken. On that occasion, the resistance was not as strong as it is now and yet it took the bulls 3 months and a lot of backing and filling to break the level convincingly. Past history likely means that either way the index is not going to be able to push much above the levels seen last week. By the same token, this week is likely to be indicative of what will happen the next few months.

The probabilities do not favor the NASDAQ breaking this resistance area right now, if for no other reason than in January 2000 (Dot.com era) the index was in a more meteoric rise than it is now and yet when it got up to 4303 it generated a correction back down to 3748 within a period of 2 weeks. The uptrend finally won out but selling was seen then at these levels even with momentum being strongly to the upside. By the same token, there is no resistance seen in the monthly chart at 4303, whereas the resistance is evident at 4289, suggesting that if 4303 is seen that the longer term trend will continue (after perhaps a fast 1-2 week move down.

The most probable scenario is a move up to 4289 (4246 on a weekly closing basis), a drop back down to 3521 and then a bounce back up to 4259 (4234 on a weekly closing basis) before decisions for the long term need to be made. By the same token, whatever high the index makes this week, and more importantly where it closes next Friday is going to be the primary topic in the trader's minds.

To the downside, the NASDAQ does not show any close-by area that is considered pivotal, except perhaps Thursday's low at 4170. A break of 4170 could be the first domino falling but in reality as far as this next week, the index would have to go below last week's low at 4122 to mean anything of consequence. A break below the recent low at 3968 would be a strong sign that lower prices will be seen, likely down to the 3500 area.

Probabilities favor the NASDAQ getting up to at least 4259, if not 4289, and then coming back down to close either slightly above last week's close or in the red. If red is seen next Friday, the reaction to the downside will likely be immediate, but if the index generates a slightly higher close, like at 4246, then the bears will need to wait one more week before selling pressure is seen. Either way, the probabilities favor further downside below the recent low at 3968, to be seen over the next few weeks.

SPX Friday closing price - 1838

This past week, the SPX mimicked what happened in the other indexes rallying the same percentage amount as the other two. Nonetheless, the index finds itself only 12 points (.07%) below the all-time high whereas the NASDAQ made new highs but the DOW is still 430 points (2.7%) below its all-time high meaning that there is still a question as to whether the index is going to make a new high or whether the upside this next week will be minimal and a successful retest of the previous high made, such as is expected in the DOW.

The SPX did close near the highs of the week and it is likely the index will go above last week's high at 1841 this week. With the index showing 5 previous weekly highs between 1843 and 1850 and 3 of them between 1849 and 1850, the probabilities favor a new high made as multiple highs usually are broken.

On a weekly closing basis, there is decent resistance at 1841/1842. On a daily closing basis, there is minor resistance at 1842 and decent at 1848. On a weekly closing basis, there is minor support at 1781 and decent support at 1775. Below that level, there is minor support at 1690 and minor again at 1667. On a daily closing basis, support is decent at 1775 and then nothing until decent support is found at 1741. Below that, there is decent support between 1700 and 1710.

The SPX continues to be a follower rather than a leader but the fact it is following more the NASDAQ than the DOW is a bullish sign. The index has no resistance above and a new all-time high would open the door for the uptrend resuming. For that reason alone, the traders will be paying close attention to this index for the next 2 weeks.

A new high in the SPX would probably mean at least a rally to 1855, which in turn would clear the multiple highs seen but would not be sufficient to generate a lot of new buying interest since the all-time high in the year 2000 was 15(52) and the high in July 2007 was 15(55), meaning that the mid-point between the hundreds has brought in selling interest in the past. Nonetheless, if the index gets much above 1855 the buying spree might come back as the next level that would offer any kind of psychological resistance is 1876 as the all-time high in 2007 was 15(76).

To the downside, the SPX will show indicative support at Thursday's low at 1809 which is also where the 50-day MA is currently at, as well as the fact that level was important daily close resistance on the way up. A break and close below 1809 would be a sign that no further upside is likely to be seen.

Probabilities favor the SPX making a new all-time high, likely around 1855, and then failing. Nonetheless, it is more of a flip of a coin as to whether new highs are made or not. Evidently if no new highs are made and the index closes below 1838 next week, it would be a bearish sign of consequence.

So far the indexes have acted as the charts suggested they would but this coming week is more of a question mark than anything else as there is no recent history that will help the traders decide what to do. In addition, the indexes continue to offer mixed views of the future, meaning that the traders are not of "one mind" as to what is likely to happen now. The outlook is further confused by the fact there are no economic reports of consequence due out this week, the important earnings reports are out, and the Debt Ceiling issue has been pushed back to March 15th, meaning that it is unlikely that the traders will get any outside help this week in making a decision.

By the same token, there are quite a few long-term chart factors from the past that are in play this week and the probabilities do favor the traders following that lead since very few fundamental reasons have come out recently that would indicate that further upside of consequence would be supported.