DOW Friday close at 9820

The DOW broke above the last line of previous resistance at 9654 and continued its upward climb with 10,000 as the next objective. The break of resistance was a clear indication that the marketplace at this time believes this market to be a bull. As such, no downside is to be expected until either the upside objectives are reached or fundamental news negating the bullishness of the market comes out.

With no economic reports of consequence due out until October 7th, the DOW is likely to maintain its upside momentum for the next 2 weeks. Nonetheless, as the index reaches the 10,000 level, general selling will increase as that is a major psychological level of resistance.

On a weekly closing basis, there is no resistance seen until psychological resistance is found at 10,000. Above that level, resistance will be found at the 100-week MA currently at 10,365. On a daily closing basis, there is no resistance whatsoever until minor resistance is found at 10851. On a weekly closing basis, minor support will be found at the most recent low close at 9441 and again minor at 9321. Below that there is nothing until the 50-week MA currently at 8515. On a daily closing basis, there is decent support at the previous high daily close as well as the most recent low close at 9605. Below that level there is some decent to strong support at 9281.

The DOW was able to break above the first corrective high after the index dropped below 8000 at 9654 last October. Such a break suggests that the traders are convinced that the market is now a bull. It must therefore be understood that until that outlook is negated with fundamental news, drops in price will continue to be aggressively bought.

This coming week the economic news calendar is light and with the only reports of any consequence not due out until Thursday and Friday it is likely that further strength will be seen in the first couple of days of the week. Rallies up to the 10,000 level are likely. The 9605-9625 level should act as strong support if any selling does materialize. Possible trading range for the week is 9710 to 10030.

NASDAQ Friday Close at 2132

The NASDAQ continued its strong climb after establishing itself above the 2000 level. Nonetheless, the index is approaching levels between 2155 and 2217 that offer resistance that will be very difficult to break. As such, the NASDAQ will be the index to watch closely for indications that a top has been found.

The NASDAQ did confirm a break above the 100-week MA at 2058 with a second close above that level on Friday. With that break, the objective then becomes the 200-week and 50-month MA, both currently at 2117. Nonetheless, that level seems to offer brick-wall resistance, and therefore should be considered as maximum objective to the upside.

On a weekly closing basis, resistance is decent to at 2140 and a bit stronger up between 2175 and 2178. Above that level, resistance is decent at 2212 from a previous low of consequence, as well as from the 50-month and 200-week MA's. On a daily closing basis, resistance is decent to strong at 2175/2178 and very strong up at 2218. On a weekly closing basis, support is minor at 2019 and again at 1986. Below that, there is no support until minor support is found at 1859 and strong at 1756. On a daily closing basis, support is very minor at 2018 and decent to strong between 1969 and 1970, as well as at 1931.

The NASDAQ is on a breakout above the 100-week MA of consequence and though there are several resistance levels of importance in between, rallies up to the 200-week MA at 2217 are possible and maybe even likely. Nonetheless, there are a total of 3 resistance levels that all offer good reasons for stoppage. The first resistance level is at 2152, made in 2004. This resistance can be considered important, as it was the first major high made after the 2001 recession generated a bull market. From that high, the index dropped down to 1751 over a period of 8 months. The second resistance is at 2192 and that was the next high made after the 8-month drop from 2152. That high also generated a drop down to 1896 over a period of 3 months. The third and last resistance at 2217-2220 incorporates not only the 200-week and 50-month MA but also the third high made in August 2005 from which a drop back down to 2026 was also seen.

As you can see, all of these highs were generated in a bull market and all of the highs generated a correction of consequence thereafter. It is difficult at this time to establish which of these highs will stop this particular rally, but it seems highly likely that one of them will cause the index to drop somewhere between 200 to 400 points.

It is important to note that because this most recent rally has been straight up, no support has been built close by. The closest support is down at the psychological 2000 level. First support level of previous lows is actually down at 1967, as such, if any correction does begin to occur, drops could be fast and substantial. This also likely means the bulls will continue to push higher until they can't push anymore. At that time, the NASDAQ will probably have probably set a high that will last anywhere from 3-8 months.

This coming week the 2152 level will be the first area of importance. Should that level be taken out, further upside to 2192 can be expected. Overall the weekly charts seems to suggest the index will move up to 2017, but often clearly defined objectives are not reached. Unfortunately there is no clearly defined breakdown price to the downside that will help giving notice that the index has found a top. Nonetheless, like with the DOW, the index should maintain itself above the 50 60-minute MA while in this runaway-to-the-upside trend. A break of that line could be a signal the index has found a top. The 50 60-minute MA is currently down at the 2100 level.

S&Poors 500 Friday close at 1068

The SPX is also on a breakout of consequence with absolutely no previous resistance seen on the chart, on a weekly closing basis, before the 1107 level is reached. In addition, other than the 100-week MA currently at 1125, there is no strong resistance until the index gets up to the 1173 level. As such, there seems to be nothing to stop the index from continuing higher until the earnings report season starts in October.

Nonetheless, it must be mentioned that the SPX represents the financial industry and this is an industry that has limited potential to the upside as many of the previous ways to generate profits have now been eradicated. In addition, it is an industry that faces future congressional limitations that will prevent business-as-usual in the future. As such, the SPX is likely to be the most unstable and unpredictable index of all.

On a weekly closing basis, there is minor resistance at 1107 and then nothing until strong resistance between 1157 and 1173. On an intra-week basis, there is strong resistance at the 100-week MA currently at 1125. On a daily closing basis, there is no recent daily close resistance nearby. On a weekly closing basis, support is minor at 1016 and again at 1004. Strong support is found down at 879/882. Below that level there is minor support at 825 and very strong support at 800. On a daily closing basis, there is decent support at 994 and strong at 979. Below that level there is also minor support at 946 from a previous daily high close.

The SPX has now broken above the last area of resistance at 1044 that was set up as the high right after the index broke down to 840 the first time down last October. On an intra-week basis, using the chart from last year (not 2004) there is no resistance whatsoever until minor resistance is found up at 1167. As such, the index should continue to move higher until such a time that some negative fundamental news is released or the buyers run out of gas.

The bulls, though, are committed to continuing to run the index up as they face no pre-determined selling area nearby. If they fail to continue upward the overbought condition and lack of nearby support (closest support is down at 1016) will likely cause a strong profit taking event to occur. Like with the other indexes, the SPX needs to keep itself trading above the 50 60-minute MA and that line is presently down at 1153. As long as that line does not get broken, the bulls will be able to continue rallying without any selling of consequence occurring until the first week of October.

This past week all indexes were successful in eliminating the last vestiges of resistance from the collapse seen last September/October. The ability to get above those levels is a statement that the marketplace believes that a bull market is now in place. Until such a time that fundamentals show otherwise dips will continue to be aggressively supported.

With no resistance of consequence close by, in both the DOW and the SPX further upside is likely to be seen for the next week or two, on until the new earnings report seasons gets under way on October 7th. Nonetheless, the indexes are now overbought to the maximum degree and once the major resistance levels above are reached, a strong correction is likely to occur.

The bulls have accomplished what they set out to do and since now most doubts as to the direction of the market have been silenced, it is likely that a return to normal trading (peaks and valleys) will occur once the upside objectives are reached.