DOW Friday closing price - 17000

The DOW continued to be the "ugly duckling" of the indexes, failing to accomplish what the other indexes have already done for the past few weeks. The index made a new all-time high but then only by 2 points and then failed to close in a new all-time weekly closing high by the same but negative 2 point margin, meaning that the index has not yet joined the "sorority". Nonetheless, the index did close in the upper half of the week's trading range so the possibilities are high that the "ugly duckling" may get a face-lift this week and be asked to join the fraternity, if and when the important reports due out this week don't cause everyone to look ugly.

The DOW will continue to be the "weak sister" as all attention continues to be set on the SPX and the 2000 level and on the NASDAQ and the all-time high at 5132 that is now beckoning strongly and as such, the DOW is not likely to be the index the traders follow. Nonetheless, for this week alone the index could play an important part inasmuch as a red close next Friday would create a double top on the weekly closing chart and that may end up being something that could derail the other indexes from going higher.

To the upside and on an intra-week basis, the DOW shows resistance at the all-time high at 17153. On a daily closing basis, resistance is found between 17122 and 17138 and on a weekly closing basis at 17100. Above that level there is no resistance whatsoever. To the downside, the DOW now shows pivotal support, both intra-week and on a daily closing basis at the 17000 demilitarized zone. On a weekly closing basis though, support is not as pivotal but is found at 16943. Further but minor weekly close support is found at 16775 and then important and pivotal weekly close support at 16493.

The fact the DOW has not been the index to lead the market the past few months does suggest that the rally will continue higher inasmuch as Blue Chip stocks are not as speculative or attractive-to-buy in a true bull market. Blue Chip stocks are normally purchased aggressively when the traders feel there is a higher risk involved of the trend continuing. With nothing on the horizon to suggest that the trend is about to change, the DOW will likely continue to trail the other indexes.

By the same token, the DOW will gather a bit more attention from the traders this week than other weeks simply because of the important level the index closed at on Friday. If questions about the economy pop up this week with the ISM Index and Jobs Reports, it will be the DOW that will be the first to give a clue. Probabilities favor the bulls.

NASDAQ Friday closing price - 4580

The NASDAQ made another new 14-year high this past week and closed on the highs of the week, suggesting further upside above last week's high at 4580 is likely to be seen. The index continues to be the leader and with the all-time high at 5132 now beckoning strongly, it will likely keep its leadership role until such a time that level is reached.

The NASDAQ ended up having a positive reversal month, having gone below last month's low and closing firmly above last month's high, suggesting that the all-time high monthly close at 4696 will be targeted this month. By the same token, the index is now reaching "runaway-freight-train" status as the bears have gone into hibernation and the bulls are in full control and not likely to cede control until something tangibly negative occurs and that does not seem to be in the cards for September as the economy continues to improve, or at least not showing signs of slowing down.

It should be mentioned that September has generally been the beginning of an end-of-the-year rally in the NASDAQ with the index generating strong movement to the upside the last 4 months of the year, at least when the overall trend of the index has been up. Nonetheless, there have been 2 occasions in the past 7 years when the trend was up but the index topped out in September or October. In 2007, the index made a new 7-year high in October and then proceeded to get into a 17-month downtrend that took the index down 56% in value from 2861 to 1265 and in 2012 the index made a new 12-year high in September but then got into a short-term correction that lasted 2 months and took the index down 12% from 3196 to 2810. Though it is difficult to measure at this time the probability numbers for such an occurrence and which of the 2 occurrences would likely happen, I would venture to say the 2012 correction is the most probable. I can see the index moving up in September to the all-time high monthly close at 4696 and finding decent selling at that price and then correcting 12-15% in value and down to what is now considered decent to strong support around the 4000 level. This would mimic the 2012 event where the index corrected 12% but ultimately took the index to new highs. If that were to happen this time, it would suggest the all-time high at 5132 would be tested around the beginning of next year.

To the upside and on a weekly closing basis, the NASDAQ shows no resistance until 4963 is reached. The all-time high weekly close is at 5048. On a monthly closing basis though, the all-time high monthly close is at 4696. To the downside, the NASDAQ will show minor intra-week support at 4546 and then a bit stronger at the previous all-time intra-week, daily closing and weekly closing high at 4485.

The NASDAQ is likely to continue to outpace the other indexes as it has a clear objective where the others don't. Nonetheless, it is also in a position that any kind of failure will be magnified to a high degree. The 4485 level, especially on a closing basis, is now likely an important pivot point that if broken would bring in new selling. By the same token, the 4696 level beckons with much allure as it is represents a return of the index to the glory days of the Dot.Com era back in the year 2000. The Tech industry is once again "the" driving force with companies such a AAPL leading the way.

This week is likely to bring in some volatility if for no other reason than the 2 most important reports of the month are on tap. By the same token, if the economic reports are anything else other than a bust, the traders will likely ignore them and plow forward with 4696 as the objective for the end of September, which is still 4+ weeks away. Intra-week rallies to 4696 won't mean much.

Expect the NASDAQ to continue higher this week and stay above 4485 on a closing basis.

SPX Friday closing price - 2003

The SPX accomplished its psychological goal of reaching the 2000 level when it got up to a high of 2005 and closed at 2003. The index closed on the highs of the week and further upside above 2005 is likely to be seen.

There have been 4 occasions in the past, back in the year 2000 and in 2007, where the SPX got up to a psychological resistance level such as 1500 was considered to be and failed to make much of an inroad above that level having gone up to 1552 in the year 2000 and up to 1576 in the year 2007. The monthly closes in 2000 were 1498 and 5 months later at 1517 and in 2007 at 1530 and 5 months later at 1549. On all occasions the index first got up to the level and then corrected about 12% in value and after the second rally 5 months later the index got into a downtrend. This scenario does suggest the index will get above the 2000 level by at least 30-50 points but that further upside is unlikely to be seen thereafter.

With the SPX having generated a 2003 monthly close on Friday and having seen a positive reversal month with lower lows than the previous month and a close above the previous month's high, the probabilities favor the index closing higher in September. Then again, in looking at the past numbers and the 3 previous monthly closes above the psychological resistance, it would suggest that the index will close in September no higher than 12-46 points, meaning between 2017 and 2049, which is less than 2% higher than where the index closed on Friday.

The past charts further support the idea that the SPX will make a new high in September but then likely correct down to around the 1800 level by November and then go ahead and make yet another new high by February of next year.

To the upside, the SPX shows no resistance whatsoever, though some psychological resistance is likely to be seen at the top of the 2000 demilitarized zone at 2030. To the downside, the SPX will now show support between 1984 and 1990 that on a daily closing basis should not be broken or failure signals will start to be given.

The bulls, having closed the SPX above 2000 on Friday, are now committed to generating follow through to the upside this week and especially on a weekly closing basis. A "confirmed" break above the 2000 level is required for any thoughts of taking the index even higher in the future.

The uptrend seems to have fully resumed as the indexes closed on the highs of the month and further upside is likely to be seen in September. The "sell in May and go away" adage is now past history as the Fed support, as well as improving economic conditions, prevented that seasonal event from occurring this year. The question that will now be asked is whether the seasonal tendency to rally during the last quarter of the year will occur or whether the exception seen twice over the past 7 years where the index makes a high in September or October and then corrects or begins a downtrend will be seen this year.

Important economic reports are due out this week with the ISM index coming out on Tuesday and the Jobs Report coming out on Friday. By the same token, economic reports have generally been better than expected and even when they haven't, the traders seems to be ignoring them, likely meaning that the reports this week will not have a negative impact unless way out-of-line to the downside.

All signs point to September being a positive month as all the negative seasonal tendencies have been ignored this year. Upside objectives as mentioned above will likely drive the indexes this month.