DOW Friday closing price - 16851

The DOW continues to fail at the bottom of the psychological 17000 demilitarized zone as the index has gone up the last 3 weeks up to that level with highs at 16970, 16978, and 16969 without being able to go any higher. The action seen suggests the bulls will need further fundamental help to "get over that psychological obstacle. With the ISM Index and Jobs Report due out this week, it is likely that there will be enough information for both sides (bulls and bears) to make a case for direction from this point on.

The DOW is still in a clearly defined uptrend but does show a double top on the daily chart with rallies up to 16970 on June 9th and to 16978 on June 20th, as well as a successful test of that double top with the rally up to 16969 last Tuesday (followed by 3 days in a row of lower highs), advocating that the bulls may have run out of ammunition and need to reload. The index did close in the lower half of the week's trading range, suggesting that the first course of action for the week is likely to be more beneficial to the bears than the bulls.

The DOW seems to have successfully built over the past 3 weeks a chart formation with general support at the 16700 level and psychological resistance at the 17000 level that if broken on either direction is likely to generate further movement in that direction of as much as 300-400 points. By the same token, the earnings season starts the following week on July 8th and that is likely to be the deciding factor, especially if the economic reports this week are not way out of line.

The levels to the upside and the downside are clearly defined with the 16700 level as support and the 17000 demilitarized zone as resistance but it must be remembered that they are important on a daily/weekly closing basis and not necessarily on an intra-week basis. It should be mentioned that below 16700 there is no support found until the 16300-16343 level is reached. Above the top of the demilitarized zone at 17030 there is no level of resistance were the bears can get together to stop further rallies.

With the overall bullish sentiment felt in the market and the fact that economic reports have generally been ignored when negative but supportive-to-the-bulls when positive, it does suggest the DOW will be heading higher. By the same token, the seasonal correction time frame "sell in May and go away" has not expired as in 2011 the correction started the 3rd week in July and a 20% correction was seen by the first week of October, meaning the bulls still have a lot of worrying to do. It is highly likely though, that something of consequence will happen over the next 4 weeks and this week could give the traders the first clue as to what direction is going to be seen.

NASDAQ Friday closing price - 4397

The NASDAQ seems to have re-gained the leadership of the index market, having out-performed all the other indexes this past week as well as having made a new 14-year intra-week and weekly closing high at a time when the other indexes just idled. Re-gaining the leadership does suggest that the bullish action seen is an indication that the index market is likely to continue heading higher as this is the index that had led the bull market for the past 6 years.

The NASDAQ closed on the highs of the week and further upside is expected to be seen this week. With no resistance above for another 570 points, the uptrend is not likely to be stopped or even slow down unless some negative catalyst is found.

To the upside, the NASDAQ shows no weekly close resistance above until 4963. Nonetheless, on a monthly closing basis, resistance is found at 4696. To the downside, the NASDAQ shows minor intra-week resistance at 4339 that does include the previous high weekly close at 4336, which is important as a weekly close below that level would suggest a failure to follow through signal would be given. Further but also minor intra-week support is found at 4284 and slightly stronger between 4239 and 4250. A break below 4207 would likely cause a drop down to 4000 as well as being a negative sign.

The 4339 level in the NASDAQ has taken on additional importance since it represents the previous 14-year high weekly close but also the recent low seen during the mini correction seen the past 3 weeks. A break of that level, especially on a weekly closing basis, would suggest the other indexes will have broken their own support levels built over the past 3 weeks as well as negation of the leadership role the index has taken on again.

It should be mentioned that several of the main stocks in the NASDAQ (GOOG, PCLN, AMZN, NFLX, and AAPL) have not truly participated in the last rally seen in the index, meaning that if they do participate it would help the index go higher. By the same token, all of those stocks are at pivotal points on their individual charts, also meaning that if they decide to head lower it would pull the index down. With the earnings quarter starting soon and most of those stocks reporting earnings in about 3-4 weeks, that could be the trigger for the market on either direction.

SPX Friday closing price - 1960

The SPX once again seems to be the "middle cog" in the index market, slightly outperforming the DOW but underperforming the NASDAQ. The index did generate a negative reversal week, having made a new all-time high at 1968 but then closing in the red. By the same token, the reversal was not convincing as the weekly close was only 2 points lower than last week and the index ended up closing in the upper half of the week's trading range, suggesting further upside above last week's high at 1968 will be seen this week.

The SPX is finding psychological selling coming in as it approaches the bottom of the 2000 demilitarized zone at 1970, having seen highs the past 2 weeks at 1963 and 1968. The index also continues to show choppy action over the past 27 weeks, having appreciated only 6% in value but doing it with 13 red weekly closes (50% red). Assuming that no seasonal correction will occur and that the index may be continuing its uptrend but if at the same rate of ascent, it would suggest the objective for the next 6 months will be 2079.

To the upside, the SPX will show resistance at the 2000 demilitarized zone (1970-2030). To the downside, there is now going to be minor support at Thursday's low at 1944 and a bit stronger at 1925 (1930 on a daily closing basis). Below that level, minor support from previous highs is found between 1897 and 1902, and then nothing until the 1850-1862 level.

The SPX will likely continue to trade between 1930 and 1970 until some fundamental catalyst comes out. With important economic reports due out this week and the first 3 weeks of the earnings quarter starting the following week, it is likely that something will soon be decided. A rally above the top of the 2000 demilitarized zone (2030) would be a bullish statement. A break and close below 1925 would be bearish.

The indexes are now getting into a period of time where fundamental news will once again drive the markets. This week the ISM Index comes out on Tuesday and the Jobs Report on Friday and the following week the 2nd quarter earnings reports start coming out. Traders are likely to wait for the bulk of the earnings reports (first 3 weeks) before making some decision, but the economic reports this week could make a difference if way out of line.

The probabilities still favor the bulls as the burden of proof is in the shoulders of the bears, due to the fact that Fed Chief Yellen has stated that interest rates will remain low until 2016. Fed Stimulus support has driven this market for the past 6 years and until that scenario changes for the negative, the traders will continue to buy dips.