DOW Friday closing price - 10860

The DOW was able to continue its recent upward trend with the 5th weekly higher close in a row. The index closed above a previous weekly close resistance of some consequence at 10654, suggesting that further upside will be seen this coming week, with the 200-week MA, currently at 10980, as the main objective.

The DOW, having closed on the high of the week and facing no economic reports on Monday, will likely continue its inexorable climb upward until the 11000 level is achieved. By the same token, the news has not been so compelling as to suggest that further upside will be seen thereafter.

On a weekly closing basis, resistance is decent at the 200-week MA, currently at 10980 and major at the 2-year high close at 11204. On a daily closing basis, resistance is minor to decent at 10897, minor to decent again at 10992, and strong between 11152 and 11204. On a weekly closing basis, support is decent at 10155, decent between 10012 and 9932, and strong at 9688. On a daily closing basis, support is minor at 10662 and decent at the 200-day MA, currently at 10470. Below that level, resistance is minor at 10342 and then nothing until decent to strong resistance is found at 9986.

The DOW is likely to go higher on Monday as the momentum, close on the highs of the day and week on Friday, lack of economic news on Monday, as well as the magnetism of the 11000 area, are likely to draw the index up to the demilitarized zone up between 10970 and 11030. Nonetheless, this coming week there are a slew of economic reports of some consequence with the Case-Schiller 20-city Index as well as Consumer Confidence due out on Tuesday, the 3rd estimate of GDP, as well as Chicago PMI due out on Thursday, and the ISM index, as well as Michigan Sentiment, Auto Sales, and Construction Spending due out on Friday, that are likely to have some kind of impact on what the index does for the week.

With the DOW having rallied 920 points in the last few weeks and closed in the green 14 out of the last 18 trading days, much of this on "speculation" (not hard reports) that things are getting better, getting above the 11000 level and even attempting to make new 2-year highs will face serious selling without "confirmation" that things are improving. Not only are this week's reports important, but the following week the beginning of the new earnings quarter will show just how much better things truly are, or not as companies will have to show better results than the already anticipated better results projections.

To the downside, the DOW has not had much of an opportunity to build strong supports. This past week, the 10641 level, which also represents the previous high weekly close that was broken at 10654, will be considered a pivot point as well as minor to decent support. Nonetheless, underneath there is no support until the 200-day MA, currently at 11470, is reached. Nonetheless, having seen a 258 point trading range this past week (10608 to 10866), if the index does get up to the demilitarized zone between 10970 and 11030, it would likely make the low of the week to be 10712 to 10772. This certainly fits in well with the support on the 60-minute chart that is expected to be decent around 10764, as well as with the previous-to-Friday high daily close at 10761. As such, the probabilities favor the index showing general strength most of the week, barring any unforeseen negative economic reports.

The key to the rest of the year will then likely be the earnings reports quarter that start coming out October 7th. Those reports will probably determine just how much of this recent rally is based on reality and how much of it is "smoke and mirrors".

NASDAQ Friday closing price - 2315

The NASDAQ broke above "all" the resistance levels built over the past 4 months and now shows open air above on the intra-week chart, for another 90 points to the upside until 2473 is reached. In addition, the index still shows a breakaway/runaway gap formation to the downside with the runaway gap being between Friday's high at 2381 and the low seen on May 13th at 2388. If the runaway gap is closed on Monday (very likely), the breakaway gap between 2472 and 2466, will become a magnet.

One thing that does need to be mentioned is that the NASDAQ has not outperformed the DOW as it did last year and with the week's upside objective in the DOW being 1.6% higher but the upside objective in the NASDAQ being 4.2% higher, one or the other will have to over perform or under perform the other, making the difference perhaps indicative.

On a weekly closing basis, resistance is decent to strong at 2457 and major at 2530. On a daily closing basis, there is minor to decent resistance at 2425 and major resistance between 2500 and 2530. On a weekly closing basis, support is decent at 2239 and minor at 2219. Below that level, there is decent to strong between 2141 and 2154. On a daily closing basis, support is minor at 2327 and minor to decent at the 200-day MA, currently at 2280. Below that level, there is minor to decent support at the 100-day MA, currently at 2245 and decent support at 2196.

The NASDAQ has been a good indicator of "trend" during the past 18 months and having closed this week above 2320, both on the daily and weekly chart, it is probable that the index is now in a short-term up-trend with 2473 as the upside objective. As such, watching to see if the index does outperfom the DOW should be an indication of whether the up-trend is for real or not.

The NASDAQ does show some minor to decent resistance up at 2434, which is about 2% higher than Friday's close. As such, reaching that level would tend to mimic the DOW with its upward objective of 1.6%. By the same token, based on last years history, if the up-trend is marketwide (for real) the NASDAQ should outperform the DOW this week and move above 2434. This means that the 2434 level (2425 on a daily closing basis) could be a strong indicator of just how true this rally is.

On the other side of the coin, based on last week's trading range of 65 points, it means that just to reach that level of 2434, the index would need to hold itself above 2369. As such, the 2369 level can also be somewhat indicative of what the index is to do this week.

SPX Friday closing price - 1148

The SPX has definitely been the drag of the market failing to generate the kind of buying being seen in the other indexes. Nonetheless, the index was able to generate a weekly close this past week slightly above a strong weekly close resistance at 1045, suggesting that further upside will be seen. On the other side of the coin, the index still shows strong intra-week resistance at 1150 and was unable to break above that level this week, as such, the index will be the one to watch on Monday for confirmation that further upside is to be seen, or not.

The SPX represents the financial community and that area of the market was definitely the anchor this past week, with stocks such as GS having dropped in price almost 7%, contrary to what happened in other stocks. Without the financial community participating in the rally, the upside will be limited no matter how much momentum is generated in the rest of the market.

On a weekly closing basis, resistance is decent at the 200-week MA, currently at 1200, and major at the 2-year high at 1217. On a daily closing basis, resistance is strong at 1150, minor to decent at 1172, and strong between 1200 and 1217. On a weekly closing basis, decent support is found at 1065/1066 and strong support at 1023. On a daily closing basis, support is minor at 1125 and decent at 1116 (200-day MA). Below that level there is decent support at 1100, minor at 1092 and decent at 1065.

The SPX continues to be the index to watch for clues as how believable this recent breakout is. The index has strong intra-week resistance at 1150 and even though both the DOW and the NASDAQ were able to break their resistance levels this past week, the index was unable to generate enough buying to do it itself. Having closed at 1148, the probabilities do favor the index breaking above that level on Monday and such a break will likely bring renewed buying. By the same token, if the index fails, it will cause disappointment and doubt to filter back into the minds of the traders.

With analysts in general believing that the index will reach 1200 before the end of the year, the 1150 level seems to be "the" major pivot point at this time. Having problems getting about that level, in spite of the strength seen in the other indexes, suggests that things are not as clearly defined as the other indexes are suggesting they are.

To the downside, the 200-day MA, currently at 1116, continues to be a support level of importance as a break below that level would bring in new selling. It is not expected to be seen this coming week, but if it is, and it is broken, things will start to unravel for the bulls.

The indexes are showing strong momentum to the upside and there are no economic reports due out on Monday to stop that momentum from continuing. Nonetheless, starting Tuesday, there are economic reports of some consequence that could generate some volatility and at this stage of the game, with the indexes having rallied so strongly over the past 3 weeks, volatility will tend to favor the bears.

It is important to note, though, that the rallies in the indexes have come mainly from reports not being as negative as anticipated, but certainly not from reports being positive. This type of a rally is very suspect as the economy is not yet showing any strong signs of growth.