DOW Friday closing price - 10624

The DOW was able to generate a new 17-month weekly closing high above the previous high seen 7 weeks ago at 10619. Nonetheless, it was only by 5 points and was not higher than the weekly closing high in Feb04 (the year the index seems to be mimicking) when the index closed at 10628. In addition, the index was unable to get close to the previous intra-week high at 10730, suggesting that the new weekly closing high was not that indicative.

It must also be mentioned that the DOW was strong all week when there was no economic news and yet when a very positive Retail Sales number came out on Friday, the index was unable to build on the momentum that the bulls had achieved throughout the week. Such action casts a strong doubt on the ability of the index to continue to forge upward.

On a weekly closing basis, resistance is strong at the 17-month high weekly close at 10619 and again at the 2004 February closing high at 10628. On a daily closing basis, resistance is minor at 10664. Above that level, resistance is strong at the double top between 10711 and 10725. On a weekly closing basis, support is minor to decent at 10325/10329 and strong at 10012. On a daily closing basis, support is minor at 10380/10397 from the most recent low daily close as well as from the 50-day MA. Below that level, resistance is decent at 10282 from a previous low close as well as from the 100-day MA. Decent support at 10067 and strong support at the most recent strong daily close at 9908.

Fundamental differences of opinion continue to be split right down the middle on what the market will do from here. Many analysts believe that the 9% correction seen over the past 7 weeks was the expected correction and that a new leg up is in process. By the same token many analysts are stating that this move up was simply a needed retest of the highs and that further improvement in the economy, above what has been seen recently, is unlikely to occur. There seems to be enough traders on each side of the coin to prevent one side or the other from gaining a strong advantage and that could mean that the indexes will drift for the next few weeks until the new earnings report quarter gets started in April.

One thing that is relatively certain is that the chart resistance (past history) at these levels is strong and without some "clear" indication that things will "continue" to improve, the upside will be difficult to achieve. Reports have been mixed as of late and volume on up days continues to be low. Such a mixture does not support the bull side of the equation as it is the bulls that have the burden of proof upon them. The proof tendered has not yet been totally convincing.

From a chart perspective, next week's close is likely to be quite important. Having closed on Friday above the previous high close at 10619 with a close at 10624 the DOW has forced a decision week ahead. A red close next Friday could be seen as a double top and would likely bring in strong chart selling into the equation, especially since this rally would be seen as simply a needed retest of the recent highs. A green close will give the "edge" to the bulls as the breakout above the previous weekly close would be confirmed. With no chart resistance until the low 11000's, rallies up to that level would likely be seen.

It is evident the market is waiting on some catalyst to generate movement of consequence. Nonetheless, this week could favor the bears as the important reports have more risk to the bulls than to the bears. The FOMC rate decision is due out on Tuesday and there is nothing there that can help the bulls as the Fed is already maxed out on their ability to help the market. Nonetheless, there are rumors that the Fed is about to change the wording to their monthly rate decision to a more hawkish one and that could certainly be a negative to the bulls. In addition, the PPI and CPI numbers are due out Wednesday and Thursday and if they show an increase, as were seen this past week in the Chinese inflation numbers, that too could be a blow to the bulls.

The week is full of economic reports as Capacity Utilization, Industrial Production, Housing Permits and Starts, Philadelphia Fed, Empire Manufacturing, and Initial Claims also coming out. Nonetheless, none of these numbers have the possibility of being as skewed as the previous ones mentioned could be.

The timing of all of this is also important because the DOW in 2004 saw the retest of the highs on week 7 and this past week was week 7 as well. In addition, the index did not have any economic reports it could feed on this past week but will have many this coming week.

It must be noted that Thursday was a positive reversal day with lower lows, higher highs, and a close above the previous day's high. Nonetheless, Friday's action did not generate the kind of follow through expected and therefore was disappointing to the bulls. This means that from a chart perspective, Monday's action will likely be determined by the economic reports and not by previous action on the charts. Friday's high in the DOW at 10644 can be considered a decent resistance level, especially since it mimics what happened in 2004. Nonetheless, the 10730 high seen in January is the strong resistance. Nonetheless, a break above 10644 will likely generate the move up to 10730 and the momentum of such a break could cause new buying to appear. On the downside, support can be expected at the 50 60-minute MA, currently at 10544 and on down to 10507 (last week's low). Any break of these two support levels will likely generate further downside.

With economic reports playing such an integral part of this coming week, it is very difficult to give you probability numbers on what will happen. Nonetheless, burden of proof is in the shoulders of the bulls.

NASDAQ Friday closing price - 2368

Once again, the NASDAQ continued to outperform the rest of the indexes as it received the brunt of the buying this week generating a new 18-month weekly closing high. The index confirmed the break above the previous high at 2326 with a resounding rally up to 2376 and a close in the upper half of the week's trading range. With no "recent" resistance until 2419 is reached, if the index continues higher, an additional 50 point rally should be seen.

The NASDAQ is the only index that has been successful in breaking and building a beachhead above the 200-week MA. In addition, the index finds itself only 7% below the May08 highs, whereas the DOW and the SPX are still 20% away from those same highs. As such, the NASDAQ has to be considered the index to follow for clues to upside movement.

On a weekly closing basis, minor resistance is found at 2371 and at 2418. Above that level, decent resistance is found at 2453 and major at 2523. On a daily closing basis, minor resistance is found between 2365 and 2371. Above that level, decent resistance is found at 2413, strong resistance at 2453, and major at 2550. On a weekly closing basis, support is minor at 2326 and again at 2290. Strong support is found at 2239 and a bit stronger at 2210 (200-week MA). Below that level strong support is found at 2141. On a daily closing basis, support is minor between 2282 and 2288 and minor again at the 50-day MA, currently at 2250. Below that level, resistance is decent at 2213 and decent again between 2200 and 2191 where the 100-day MA is currently located.

The NASDAQ has been a force to the upside as 11 of the last 12 days have generated green closes and the one day it closed in the red, it was only by 2 points. The index has been bought with abandon for the last 2 weeks, having rallied 8% in value since the successful retest of the 100-day MA at 2200 and the 200-week MA at 2210 the last week of February.

Nonetheless, the index now finds itself reaching levels of resistance that will require definitive proof of continued "strong" growth in the economy to be broken. Such proof does not seem to be in the cards at this time.

One thing that needs to be mentioned regarding the charts is that with the exception of the Dot.com explosion in 1998/2000, the index has always had at least a 19% correction after rallies generating between 195% and 201% increase in value. In 1996, the index rallied from 1008 to 2028 over a period of 2 years and then corrected 33%. In 2002, the index rallied from 1108 up to 2154 over a period of 15 months, before having a 19% correction, and now the index has rallied from 1266 up to Friday's high of 2376 (191% rally) over a period of 12 months. A 201% move would put the index up at 2544 or a move of 195% would put the index up at 2468.

In looking at the weekly chart, it seems highly unlikely that the high in Aug08 at 2473 will be taken out. A rally above that level would put the index into the same kind of bull market as the Dot.com era. That doesn't seem possible at this time. As such, even if the 2376 level of resistance from 2006 gets taken out this coming week, the NASDAQ is not likely to rally more than 100 points from Friday's close, and that would be stretching it. My belief is that if the 2376 level gets taken out, 2419 will be the stopper.

The big question then remains as to whether the 2006 high at 2376 will hold up, or the index will rally up to the strong resistance that starts at 2419 and goes all the way up to 2473. The good thing is that 2376 is close by and it's likely that on Monday or Tuesday, at the very latest, that level will show itself to be major resistance, or be strewn aside for the higher numbers. Either way, it is likely the index is at or very near the highs and that a correction of somewhere between19% to 33% will occur. Such a correction would take the index down below 2000. By the way, this is considering that this is a bull market and not a double dip recession!

On the downside, nothing will be decided, chart-wise, unless the support at 2282/2288 gets taken out. There is some support on the 60 minute chart at 2331 that could be a catalyst for lower numbers but on the daily chart, the 2282/2288 level is the likely pivot point.

SPX Friday closing price - 1150

The SPX was also able to get above its previous intra-week high at 1150 but was only able to do so by a couple of points, thus keeping an air of uncertainty about its future. This inability to go substantially higher was especially confusing since the financials were one of the groups that showed the most strength this past week, starting with the dog in the group AIG. Nonetheless, the index did close in new 17-month weekly closing highs and with no "recent" resistance until the 1200-1225 level is reached, the possibility of higher numbers is strong.

The SPX does seem to be the middle ground for the stronger NASDAQ and the slightly weaker DOW. As such, it could be the index that decides the direction for the next few weeks, especially since it is the only index that is trading at levels that have been important recently, as well as in the past (2001 and 2004).

On a weekly closing basis, there is no recent resistance until the 200-week MA, currently at 1225 is reached. Nonetheless, from 2001 and 2004, resistance is strong at 1157, 1163, and 1172. On a daily closing basis, resistance continues to be strong at 1150. Above that level, there is only minor resistance at 1213 and a bit stronger at 1255. On a weekly closing basis, support is minor at 1102 and decent at 1066. On a daily closing basis, support is decent between 1091 and 1095, decent again at 1074 and strong at 1057.

The SPX has had a lot of problems getting above the 1150 level for the past 7 weeks. This level did not have that much meaning in the past but now seems to have become an important pivot point for the near future. With no "recent" resistance above 1150 until the 1200-1225 level is reached, the bears are strongly defending this area as the resistance from 2001 and 2004, between 1163 and 1177, is too far in the past to be relied on. It seems likely that if the index is able to "establish" itself above 1150, that a run up to the 1200 level would be in order.

Nonetheless, it must be mentioned that in 2001, after a drop down to 944, the 1173/1177 level proved to be a very strong resistance, having gone up to that level on 3 separate occasions over a period of 3 months. In 2004, the index after a low of 788, got up to 1163 and then got into a 6-month correction. In both of those occasions, the index had been on a strong short-term up-trend, such as has been seen here recently. Whether those same levels prove to be stoppers again is yet to be seen, but the fact that the index this time around stopped at 1150 and is now having problems at that level again, seems to prove that traders are once again interested in selling this general area between 1150 and 1174.

The SPX did generate a higher weekly close this past week but on the daily closing basis, the 1150 level is very important as a red close on Monday will generate a double top at that price. It must also be mentioned, that because of all the prior resistance from 2001 and 2004, the bulls can't be aggressive at this price because the face continued strong resistance every 7-8 points, for another 24 points higher. That has to be considered a discouraging outlook for the bulls as they need strong fundamental news to be able to get above all that established resistance.

One positive thing for the bulls, though, is that the index already saw a 9% correction over the past 7 weeks and strong buying was evident on that dip. If the index does get further positive fundamental news this week, it is possible the index will trudge through the "old" resistance levels as this area, above 1150, does not show any recent resistance levels established.

It is evident that Monday is an important day for the index, as a red close will generate a double top on the daily chart. By the same token, having broken above the previous intra-week high at 1150 with a rally to 1153 on Friday, that follow through is a must for the bulls. Because of the breakout, the 1132 level now becomes an important support level, that if broken would give a failure to follow through signal of consequence.

Much will be decided this week with the economic reports but even with those reports the 1132 to 1177 level must be considered the area to watch. A break above or below either of those two levels is likely to generate strong follow through in that direction.

With the lack of economic news this past week, the indexes were able to maintain their recent momentum as the traders were not about to shake the boat without fundamental support. This week, though, economic news is ample and it is highly likely that movement of some consequence will be seen. Whether the movement will be down or up is difficult to assess as of this writing, but one thing is clearly evident, and that is that even if the news is positive, the upside is limited, whereas the downside does have more room for maneuvering.

In looking at the monthly chart of the DOW, the probabilities strongly favor a trading range for the next year or two between 9000 and 11350. Those parameters are clearly set by actions seen in the index for the past 10 years. At these prices, though, that does mean there is more risk to the bulls than to the bears, as the indexes are presently trading nearer to the top of that range than to the bottom. Many analysts have also stated that the economy is likely to go stagnant during the rest of the year as most of the gains to be made have been made, and that further improvement to the economy is unlikely under the present economic conditions.

The question then is "what will happen this week and for the short-term". With all the economic news due out this week, it is highly likely that answer will be set by Thursday when the last of the economic reports for the week is out.