DOW Friday Closing Price - 40659
SPX Friday Closing Price - 5554
NASDAQ Friday Closing Price - 19508
RUT Friday Closing Price - 2141

The indexes have seen a strong recovery from the recent fall. For example, the SPX has rallied 8% over the past two weeks, after having dropped 9.8% in value over the 4 weeks prior to that. There has not been any "major" change in the fundamental picture either way, meaning that it has been more about speculation and emotion than it being due to any actual tangible news. Nonetheless, the bulls presently have the short-term control after all indexes (with the exception of the DOW) broke short-term resistance levels that were not expected to break, if and when the original outlook of a potential depression had any merit to it. Evidently and based on the reports this past week (Retail Sales and weekly Initial Claims), things are still moving positively forward, meaning that a potential recession is not in the cards at this time.

Having said that and looking at the overall fundamental picture and the charts, it is unlikely that any new all-time highs will be made, given that all the reports this month have shown that there is a slow-down occurring in the economy. This likely means that this move up seen over the past 2 weeks will turn out to simply be the required/needed retest of the all-time highs, which is normal in any chart scenario when the market has found a top to the rally, or at least a temporary top. This scenario might have been in question under any other situation where the market was not facing the seasonally worst month of the year (September). Nonetheless, with the economic slowdown, the Fed not expected to do anything until the end of September, and the high volatility being seen (which is not normal in a rising market), it is unlikely that much further upside will be seen during the next 2 weeks. In fact, it would surprising if the market does not find a recovery top this week (or at the latest the next) and start moving down as September nears. There are no reports of consequence scheduled for the rest of the month, meaning nothing that could help the bulls maintain this rally for much longer.

Down to specifics, here they are. The DOW did make a new all-time weekly closing high on Friday (40659 - above the previous one at 40589) but on an intraweek basis, there are 2 higher previous intraweek highs at 41198 and at 41376. The index did close on the high of the week and further upside above last week's high at 40726 is expected to be seen. With the previous high being 178 points lower than the all-time intraweek high, it is possible that the index will get up as high as the 40,000 demilitarized zone (40970-41030) but it will have problems going higher.

The SPX has no previous intraweek retest of the all-time intraweek high at 5669 but the all-time high weekly close is at 5615 and there is an open gap at 5639. Both of those levels are magnets. The former is likely to be reached but the latter (the gap) is at best a 50-50 proposition. The index closed on the high of the week, suggesting further upside above last week's high at 5561 is expected to be seen this week. Having said that, the bulls do have a couple of chart resistance points that will cause problems. First, there is a decent intraweek resistance at 5566 that did not get broken on Friday. If it does get broken, there is a minor intraweek resistance at 5585. More importantly, the daily close level that was pivotal support and when broken brought all the selling interest, is found at 5584. It is highly doubtful that level will be broken on a daily closing basis. With the index closing at 5554 on Friday, it suggests that on a daily closing basis, no more than 30 points will be seen to the upside.

The NASDAQ continues to be the laggard of the indexes and that should not change, based on the fundamental and seasonal picture being seen at this time. As such, this index is likely to continue to underperform. The index closed on the high of the week and further upside above last week's high at 19561 is expected to be seen. The initial weekly close breakdown point was 19682. Having closed on Friday at 19508, further upside (on a weekly closing basis) should be no more than about 154 points. Having said that, the bulls will be facing a tough situation starting Monday, given that the original breakdown point (on a daily closing basis) was 19522. In addition, there is a breakaway/runaway gap formation with the runaway gap being at 19736. This formation was created with tangible negative news for the Tech industry, and as such, should not be closed. This means that the index has very limited intraweek room to the upside (likely less than 200 points) and extremely limited upside on a daily closing basis. Then again, this index is the one that the traders will be watching closely, given that if it closes the runaway gap and generates a clear close above 19522 on any day this week, this will give the bulls new ammunition (above what they have now).

The RUT continues to be one of the important indexes to watch, especially given that it is likely to continue to outperform the other indexes (based on the fundamental and chart picture involved). Then again, the index does have very clearly defined levels of chart resistance/objectives that are likely to be reached but are short-term pivotal. For example, and using the weekly closing chart, the index previously generated 2 weekly closes above an important weekly close resistance at 2159 (closed at 2184 and at 2209) but then gave a failure signal 3 weeks ago, when it closed at 2109. That failure signal has now been confirmed for the last 2 weeks with closes at 2080 and on Friday at 2142. Getting back up to 2159 (on a weekly closes basis) is highly likely but what it does there, is going to be indicative. On a daily closing basis, the 2184 level is important, given that when that level got broken to the downside, it brought about the failure signals given. This chart picture does suggest that the index could go up 42 points (on a daily closing basis) but it is unlikely to go any further. Then again, this index should outperform the rest of the market, so these levels are very important to the index.

Having said all of the above, it is likely that further upside will be seen this week but limited in nature. If the levels mentioned above are reached, the probability of the indexes beginning to move down is high. As such, the question in play is "when will those levels be reached (this week or next)"?

HSI generated a new 4-week intraweek, daily, and weekly closing high and closed on the high of the week, suggesting further upside above last week's high at 17473 will be seen this week. The index did generate a buy signal on the daily closing chart (closed above the 4-week daily closing high at 17344) and technically also a failure signal against the bears. Nonetheless, the latter was only by 13 points (17430 vs 17417) and therefore not yet convincing. The index has daily close resistance at 17635, which if broken, would confirm all of the above. If that does occur, the next resistance of importance is at 17718 (on a weekly closing basis) as that is the weekly close support level that when broken, brought about all the recent drop down to the 16647 level. On an intraweek basis, there is now support at 17094 and then at 16879. Nonetheless, the daily closing chart is the important one to watch. To start with, a close below 17344 would generate a failure signal against the bulls and give back the short-term edge to the bears. If that occurs, then the 17109 level becomes important as a break of it, would give a new sell signal. Below that, a close below 17004 would give back full control to the bears. Probabilities do favor the bulls, at this time.

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GOLD(Dec 24 chart) made a new all-time intraweek and weekly closing high and closed near the high of the week, suggesting further upside above last week's high at $2548 will be seen this week. The bulls have full control (at this time) and the only upside objective where some selling interest would be automatically expected to be seen is at $2800 (which means a 15% increase above the previous all-time weekly closing high at $2400). To the downside and on a daily closing basis, the $2479 level is now short-term pivotal support. A close below that level would take away quite a bit of ammunition away from the bulls.

OIL generated a negative reversal week, having made a new 3-week high but then closing red and near the low of the week, suggesting further downside below last week's low at 75.54 will be seen this week. The reason given for the drop is lower demand for Crude Oil from China. Chart-wise, this drop was not unexpected given that Oil got up close to a minor to decent intraweek resistance between 80.69 and 80.65 (got up to 80.16) and a correction back down to retest the 6-month intraweek low at 71.69 was expected to occur, before further upside could be seen. Intraweek support is found at 74.59 (74.73 on a daily closing basis). Nonetheless, and on a weekly closing basis, support is found at 75.53. I do expect the seen the lower levels early in the week and a close on Friday around the weekly close support, followed by a move up thereafter.

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