DOW Friday closing price - 17897

The DOW continued the recent uptrend, having generated a new 5-month intra-week and weekly closing high this past week. The index closed near the highs of the week and further upside above last week's high at 17962 is expected to be seen this week. Nonetheless, the 17977 level represents a 9-month high of consequence that will likely require some additional and strong fundamental positives to break, which are unlikely to be seen at this time.

In addition and from a purely chart point of view, the DOW is now showing what is likely to be/become a Cup and Handle formation with the cup being the 12-week drop from 17977 down to 15450 and the 13-week rally back up to last week's high at 17962 and the handle would then likely be the 5% correction that is expected to be seen from these levels. If the 17977 is not surpassed this week, or not surpassed by more than a few points, the formation will be considered viable and a drop down to somewhere between 17037 and 17122 would then likely occur over a likely period of anywhere from 5-8 weeks, which in turn would be considered the Handle of the formation.

The death cross of the MA's in the DOW occurred 2-weeks ago and remains a strong longer term concern for the bulls, inasmuch as in 2001 when that cross occurred (most similar to the one being seen now) the index did not begin any kind of a correction until the 8th week after the cross. The index then corrected 17.5% but then generated a rally to new highs 315 points above the previous high, before embarking on a new 29% correction. It is evident that each death cross has had a different fundamental and chart picture, meaning that the probabilities do not favor this cross mimicking either of the 2 previous ones, but with the Cup & Handle formation presently being formed it is possible that "something-like" 2001 will occur, with the index forming the C&H formation, generating the correction and then rallying to break the formation to the upside but failing to make a new all-time high, which in turn would turn the traders mid-term bearish for the negative outcome of the death cross.

Taking all of this chart speculation into consideration, the following outlook could be the end result: 1) the DOW fails to get above 17977 this week (or gets above it by a few points) 2) a 5% correction occurs over the next 4-6 weeks 3) a new rally occurs that gets the index above 17977 but fails to break the all-time high at 18351 4) disappointment occurs that generates a strong downtrend that lasts anywhere from 7-18 months. This scenario fulfills the Death Cross outlook, the Cup and Handle outlook (at least as far as the forming of it but not the end objective) and the fundamental outlook (given that the present growth in the U.S. and the rest of the world does not support new highs being made this year).

To the upside and on an intra-week basis, the DOW now shows decent resistance at 17977 and again decent between 18103 and 18133. Strong resistance is found at the all-time high at 18351.

To the downside and on an intra-week basis, the DOW shows minor to perhaps short-term decent support between 17700 and 17730. Below that level there is minor to perhaps decent but short-term pivotal support at 17484, minor again but likely short-term pivotal at 17399 and then decent as well as longer term pivotal at 17116, which does include the 200-day MA, currently at 17120.

There is a lot at stake in the DOW this week as any fundamental surprise from the OPEC meeting could throw a monkey wrench into all the chart outlooks. Nonetheless, probabilities do not favor such an occurrence happening, meaning that the chart picture mentioned above, at least for the short-term, seems to be viable and likely to occur.

Probabilities favor the bears this week.

NASDAQ Friday closing price - 4938

The NASDAQ generated a positive reversal week, having gone below the previous week's low and then closing above the previous week's high and near the highs of the week, suggesting further upside above last week's high at 4961 will be seen this week. In addition, the index closed above a whole slew of previous daily and weekly closes (8 of them) from the past 52 weeks between 4909 and 4933, meaning that most of the chart negatives from the past 4 months have now been wiped away.

On a possible negative note, the NASDAQ bulls have not yet closed the January gap up at 4999 and with this coming week being pivotal to the indexes (due to the OPEC meeting and 2 of the big 4 stocks in the index (NFLX and GOOG) reporting on Monday and Thursday), closure of the gap may not be as easy to accomplish as it would be any other week.

To the upside and on an intra-week basis, the NASDAQ shows decent resistance at 4960/4961 and some psychological resistance at 4970 (bottom of the 5000 demilitarized zone). Above that level, psychological resistance is found at 5030 (top of the 5000 demilitarized zone) and minor at 5042. Further and stronger resistance is found between 5116 and 5119.

To the downside and on an intra-week basis, the NASDAQ shows minor to decent support between 4888 and 4903 and again at 4871. Below that level, there is minor support at 4832 and pivotal support at 4808.

The 4960 level (and up to 4970) in the NASDAQ is now the "bone of contention" that the bulls and bears will be fighting to break or defend and will likely be seen as a longer term indication of what the index will do the rest of the year. Closure of the gap up at 4999 and reaching the 5000 level will be seen as a bullish statement that would clearly indicate that the 4209 low seen in February is likely the low for the year and that at some point in 2016 that a new all-time high may be made. Failure to close the gap will leave the door open for further weakness this year.

The NASDAQ is now trading in a 130 point trading range between 4870 and 5000 that is likely to "tell the story" depending on which one gets broken first. Both of these levels have "book end" gaps at 4879 and at 4999, meaning that closure of either gap will likely be indicative of how the traders view the rest of the year.

The probabilities favor the bulls in the NASDAQ as the index is in a strong uptrend and the positive reversal and close near the highs of the week should give the bulls momentum and ammunition for further upside this week. Nonetheless, the bulls probably need to accomplish this on Monday, given that NFLX reports Monday after the market close and the expectations are for a disappointing report, meaning that the index may have a tough time heading higher if the report is negative.

SPX Friday closing price - 2080

The SPX made a new 4-month intra-week and weekly closing high on Friday and closed near the highs of the week, suggesting further upside above last week's high at 2087 will be seen this week. Nonetheless and on a possible negative note, the bulls were unable to break the daily close resistance found at 2081, meaning that the bulls will need some fundamental help this week to generate a breakout of that level, which has been pivotal on 8 different occasions over the past 52 weeks.

The SPX has been the index in the cross hairs as it is the index receiving the first earnings reports of importance for the Quarter. Three of the main stocks in the index reported earnings last week and they were slightly better than expected. Two more will report at the beginning of this week, with MS reporting Monday morning and GS reporting Tuesday morning. As such, it is highly likely that what the index does on the close on either of the first 2 days of the week will be indicative, with the daily close at 2081 being the deciding factor.

To the upside and on an intra-week basis, the SPX shows minor to perhaps decent resistance at 2093 and again at 2104. Decent and indicative resistance is found at 2116 and strong resistance is found at the all-time high at 2134.

To the downside and on an intra-week basis, the SPX shows minor but likely short-term pivotal support at 2068/2070. Below that level, minor support at 2039, pivotal support at 2033 and minor support at 2022 and on a daily closing basis at 2014, which is where the 200-day MA is currently located. Further and longer term pivotal support is found at 1969.

It is evident that the 2081 level, based on a daily closing basis, is the short-term deciding factor on what the stock will do for the next few weeks. A confirmed and decisive close above that level will thrust the index into trading back up toward the all-time high at 2134 and a confirmed close below 2081 will likely bring about a 5% correction and a drop back down toward the 1970 level.

Probabilities slightly favor the bears.

The charts are now set/fulfilled for the traders to be able to make a decision this week as to what the indexes will do for the next couple of months. The decision is likely to be based on what OPEC decides to do on Sunday as earnings reports are generally expected to be negative and not likely to be so way out of line to the upside as to be catalytic.

Chart-wise, the probabilities favor a correction starting soon, given that most of the important and possibly catalytic earnings reports will be out by the 28th of April and most importantly that the areas of resistance being reached have stopped the indexes for the last 16 months, meaning that to break those levels, extremely good fundamental news is required and that is not likely to be a high probability event.