DOW Friday closing price - 18491

The DOW generated a positive reversal week, having made a new 4-week low and then closing in the green. The index closed near the highs of the week and further upside above last week's high at 18544 is expected to be seen this week.

The bulls in the DOW were able to keep the index above the previous 7-week low at 18247, which also generated a successful retest of the previous all-time high daily close at 18312, having dropped down to 18295 and then turning around. In addition, the previous week's small sell signal was negated when the index closed above the previous low weekly close at 18432 that generated the sell signal.

To the upside and on an intra-week basis, the DOW shows minor resistance at Friday's high at 18572, a bit stronger at 18631 and decent at the all-time high at 18668. Above that level, there is minor psychological resistance at 18700 and decent psychological resistance at 19000.

To the downside and on an intra-week basis, the DOW now shows minor support at 18335, minor to perhaps decent at 18295 and decent at the 7-week low at 18247. Below that level there is psychological support at the 18000 demilitarized zone and then no support until the 17713 level is reached, which is now considered pivotal support. On a daily closing basis though, support is decent and now longer term pivotal at 18313.

The DOW is now showing a clearly defined bullish flag formation with the flagpole being the rally from 17063 to the recent all-time high at 18668 and the flag, the recent 7-week trading range down to 18247. A break above the top of the flag will offer a 19852 objective. Nonetheless, the bull flag is unlikely to be fulfilled even if triggered (new high above 18668) as the interest rate scenario remains a difficult obstacle for the bulls to overcome, not to mention the psychological resistance that would likely be found at 19000.

The DOW seems to be mimicking the action seen in 2012 where the July-August swoon did not occur and in 2012 and 2013 when a new high above the May high was seen in September. On both occasions a correction occurred that ended in October. The corrections were 8.8% and 6.4% respectively. A correction of 6.4% would suggest that the index would drop down to the 17500 level (using 18700 as a potential high).

The probabilities of a correction occurring in the DOW after the Fed rate announcement are decent, given that if the Fed announces an interest rate hike on September 14th it would be an immediate negative as the possibility of another one in December would keep the bulls at bay and if they don't, it would strongly suggest that it would happen in December, meaning that the bulls would have a negative ahead under either scenario.

The probabilities favor the bulls in the DOW this week, with the only question being "how much will be achieved?".

SPX Friday closing price - 2179

The SPX generated a positive reversal week, having made a new 3-week low and then closing in the green and on the highs of the week, suggesting further upside above last week's high at 2184 will be seen this week.

On a negative note though, the SPX is still showing a double top on the intra-week chart at 2193, having made that high on August 15th and August 24th. By the same token, there is no double top on the weekly chart, given that those 2 highs were seen 2 weeks "in a row", thus not giving the double top on the daily chart the strength it might otherwise have.

To the upside and on an intra-week basis, the SPX now minor to perhaps decent resistance at 2187/2188 and decent to perhaps strong at 2193. Above that level, there is psychological resistance at 2200.

To the downside and on an intra-week basis, the SPX now shows minor to perhaps decent support at 2157 and minor to decent but short-term pivotal at 2147. Below that level there is no intra-week support until minor to perhaps decent support is found at 2074.

The SPX is facing an important week, given that there are no possibly catalytic economic reports scheduled for this week that can give the bears any new fundamentally negative ammunition. As such, it is the best opportunity the bulls will have (prior to the Fed announcing the September rate report) to make a new high and get rid of the double top and renew the uptrend. The 2187/2188 level seems to be pivotal this week as getting above that level would suggest that the double top at 2193 will be reached and broken.

By the same token, the SPX bulls have been unable to make anything of consequence happen over the past 7 weeks, having traded within a 46 points trading range between 2147 and 2193 for that period of time. As such, the probabilities favor the index trading uneventfully again between 2160 and 2188.

NASDAQ Friday closing price - 5249

The NASDAQ made a new all-time high weekly close on Friday, above the previous one seen 3 weeks ago at 5238. In addition, the index generated a positive reversal week, having made a new 4-week low and then closing in the green and near the highs of the week, suggesting further upside above last week's high at 5263 will be seen this week.

By the same token, no new all-time intra-week high above 5275 was made in the NASDAQ, meaning that the bulls have more work to do before it can be said that the uptrend has resumed.

To the upside and on an intra-week basis, the NASDAQ now shows minor to perhaps decent resistance at 5171/5175. Above that level there is no resistance at all, other than perhaps "general" at 5300 (300 points above an even level, such as 5000).

To the downside and on an intra-week basis, the NASDAQ shows minor to perhaps decent support between 5189 and 5191. Below that level, there is no support until minor to perhaps decent support is found at 5109. Nonetheless, on a daily and weekly closing basis, the previous all-time highs at 5218 (daily) and 5210 (weekly) are pivotal as a close below those levels will generate a failure to follow through signal.

This past week in the NASDAQ, the bears broke a double low at 5191 that should have generated enough selling to close the gap between 5174 and 5186 that was created on August 5th, especially considering that the break of the double low also meant that the 200 60-minute MA, at that time at 5200 (and not having been broken for the last 8 weeks), was broken as well. The ability of the bulls to make all of that happen does suggest that they are still in total control and that new all-time intra-week high will be made this week.

The NASDAQ is showing a possible double top at 5171/5175 that will be the only chart resistance the bulls will face this week. Having closed on Friday at 5149, a rally of only .05% is needed to make that happen and without any economic news of consequence scheduled for this week, the probabilities favor the bulls. By the same token and considering the sideways action of the indexes during the past 4 weeks, a trading range between 5197 and 5271 is a real possibility. By the same token, a break above 5275 should generate enough buying interest to reach the general resistance at 5300 or even perhaps the 5367 minimum target when using the percentage rally seen in 2012 (a year like the one being seen now).

The indexes generated positive reversal weeks this past week due to disappointing ISM Index report and the less-than-expected Jobs report, which in turn lowered the possibilities of Fed raising interest rates twice more this year. The big question for this week is whether the bulls can resume the uptrend and make new all-time highs in spite of the signs of the economy slowing down or not.

With no economic reports of consequence scheduled for this week and the indexes closing near the highs of the week and only a few points below the all-time intra-week highs, the charts suggest that the bulls will be successful, especially considering that a September rate hike is now probably "off the board". By the same token, the indexes have now been trading sideways for the past 4 weeks and the possibilities are about 49-51 that the outcome will remain the same.

On a positive note for this coming week, in 2012 and 2013 the indexes did make new highs by the second week of September (above the August highs) though in both cases around mid-September a correction of more than 6% was seen, meaning that this coming week could be the last rally before some short-term selling of consequence is seen.