DOW Friday closing price - 17084

The DOW generated a strong rally of 638 points last week and closed near the highs of the week, suggesting further upside above last week's high of 17110 will be seen this week. Nonetheless, it must be mentioned that on an intra-week basis the index has now recovered 61.7% from the low at 15370 seen 7 weeks ago and a 61.8% recovery (up to 17212) puts the index at an important Fibonacci number that might mean that further upside might not occur without some positive and even catalytic fundamental news coming out.

It also needs to be mentioned that the rally in the DOW has only taken the index back up to the original weekly close "breakdown point" at 17184 (17064 on the daily closing chart), meaning that nothing of consequence has yet been accomplished by the bulls, other than a return (possible retest) to the important pivot point level that caused the correction/downtrend to accelerate.

The traders in the DOW will have some fundamental information to evaluate this week to determine if an end-of-the-year rally will be seen, inasmuch as JNJ, INTC, and GE report this week, in additional to NFLX and most of the important Financial stocks. Earnings are now likely to be the key to whether the recovery continues or not as the interest rate hike has now likely been pushed back to the first quarter of next year.

To the upside and on an intra-week basis, the DOW shows no resistance until the 17500-17568 level is reached. Further resistance is found at the 200-day MA, currently at 17600. Nonetheless, on a daily closing basis, resistance is found at 17168 and then again between 17320 and 17355.

To the downside and on an intra-week basis, the DOW shows minor support at the 17000 demilitarized zone and then nothing until minor support is found at the 16700-16730 level.

The DOW will be in a "discovery" phase this coming week, given that there are no "intra-week" support or resistance levels of importance close-by, meaning that moves of some consequence could be seen in either direction without triggering additional selling or buying interest. On the other side of the coin though, on a closing basis this is an area that is of importance to the index, inasmuch as a weekly close above 18167 would mean that the correction is not only over but that resumption of the uptrend before the end of the year is possible, if and when the fundamental picture supports it.

At the end of the week, the short-term direction of the DOW is likely to be determined fundamentally by how the earnings scheduled for this week came out. Based purely on the chart though, I would venture to say that the bears have a slight edge. Nonetheless, a decisive move above 17300 or below 16700 will likely push the index further in that direction.

NASDAQ Friday closing price - 4830

The NASDAQ did exactly what was expected of it, given that the spike-low positive reversal that occurred the previous week generated a follow through rally that carried the index back up to the weekly close resistance area around 4828 that has been in place for the past 7 weeks. The index closed on the highs of the week, suggesting further upside above last week's high at 4830 is expected to be seen this week.

On a negative note though, the NASDAQ remains trading below the 50-week MA, currently at 4885, and that is a line that has proven itself to be amazingly indicative for most of the last 24 years, strongly suggesting that the bulls have not accomplished anything of consequence yet. By the same token, the line remains as a close-by point of reference that will give the traders the information they need to make decisions as to what to expect from now to the end of the year, depending on whether the line is broken or not.

On a possible positive note, the NASDAQ built a similar kind of formation between November and February, having generated a 10-week pause in the uptrend, in which the index established 3 low weekly closes at 4653, at 4634, and at 4635 and 3 high weekly closes at 4791, 4806, and at 4771, before resuming the uptrend. On this occasions, the index has generated an 8-week pause with 3 low weekly closes at 4706, 4683 and 4686 and 3 high weekly closes at 4827, at 4827, and at Friday's close at 4830. The only difference between the 2 periods is that the one in November was a pause in an uptrend and this one seems to be a pause in a downtrend, which in turn would suggest there is a higher chance of the downtrend resuming than an uptrend restarting.

Based on the chart formation mentioned above, a red close in the NASDAQ this coming week would suggest the bears might end up with the "winning hand", while a green close would not necessarily be suggestive of further upside unless the index closes above the weekly close breakdown point at 4871 while at the same time closing above the 50-week MA, currently at 4885.

To the upside and on intra-week basis, the NASDAQ will show minor resistance at 4862 and then nothing until decent resistance at 4960. Nonetheless, on a daily closing basis, resistance is decent at 4893 and a bit stronger at the 200-day MA, currently at 4920. On a weekly closing basis, resistance is minor to perhaps decent between 4871 and 4885.

To the downside and on an intra-week basis, very minor support in the NASDAQ is found at 4746 and again at 4711. Below that, minor to perhaps decent support is found at 4611 and then decent at 4483. On a weekly closing basis, decent and likely pivotal support is found at 4683.

It is evident the NASDAQ is facing a couple of very pivotal weeks that could be easily decided on how the earnings reports on the big stocks in the index (AMZN, AAPL, NFLX, GOOG, and PCLN) come out over the next 2 weeks.

The price levels to watch closely in the NASDAQ the next couple of weeks are 4683 and 4885, based on a weekly close. A close above or below those 2 levels are highly likely to generate indicative follow through in whatever direction the levels are broken.

The probabilities for this week favor the bulls in the NASDAQ, but then only for a limited rally.

SPX Friday closing price - 2014

The SPX was the big winner this past week, given that it closed above the weekly close breakdown point at 1994, as well as above 2 previous high weekly closes at 2007 and 2010 and above another previous low weekly close at 2002, which is not something that either of the 2 other indexes were able to do. The close above the 1994/2002 level will negate the breakdown point seen in August and that caused the drop down to the correction low at 1867, if and when the index can generate another close above 1994/2002 this coming Friday.

The SPX closed on the highs of the week and further upside above last week's high at 2020 is expected to be seen this week. Nonetheless, the index will be the first recipient of important earnings reports for the quarter this week with WFC, JPM, GS, CIT, and BAC scheduled to come out, meaning that if the reports disappoint and the index closes in the red next Friday, the confirmation of the negation of the breakdown will not occur.

It is evident that the traders keyed on buying the SPX this past week because the overall market was rallying and the financial sector is presently the "darling" of the market, given that the Fed continues to push back the date of an interest rate hike. Nonetheless, if that positive scenario is not supported by the earnings report on its main financial stocks, the index could "give up the ship" just as fast as it "took the helm".

To the upside and on an intra-week basis, the SPX shows minor to perhaps decent resistance at 2020, minor at 2050 and then nothing until decent resistance is found at 2064, which is strengthened by the fact the 200-week MA, is currently at 2061. On a daily and weekly closing basis though, the resistance can be considered minor to perhaps decent between 2046 and 2053, which does represent a support level that held up to 5 months and when broken caused the first breakdown to occur.

To the downside and on an intra-week basis, the SPX shows minor support at 1992 and decent as well as pivotal between 1972 and 1980.

The SPX will be the index the traders will be watching closely this week, given that it is likely to be "leading the parade" this week as most of the important earnings reports this week and the big stocks in the index.

Probabilities favor the SPX heading up to the 50-week and 200-day MA's, both currently around the 2060 level. Upon reaching that level, whatever happens is likely to be indicative.

The indexes are reaching pivotal levels this coming week that could go far in deciding what the market will do the rest of the year. The rally seen the last 2 weeks is surpassing the slow and steady end of the year move that was expected to occur, meaning that the door has been opened for another downside run of consequence if the bulls fail to get the fundamental support for higher prices that this run requires.

Fundamental support at this time is likely to be dependent on how earnings come out the next couple of weeks since that is likely to be the only economic information that will affect the market for the last quarter of the year, especially since the probabilities now favor the Fed doing nothing until the first quarter of next year.