DOW Friday close at 8076

For the first time in the last 7 weeks the DOW closed lower than the previous week. On a week when the market received a mountain of positive earnings reports (75% of all reports this week came in better than anticipated) as well as better-than-expected economic reports, the inability of the index to generate a higher close must be considered a big negative.

It is evident that the 8000 level in the DOW is major resistance on the chart and with most of the good news already out, it seems difficult to imagine what information could come out that would allow the index to move to higher levels.

On a weekly closing basis, resistance is now found at 8131 (last week's close), minor at 8281 and major at 9035. On a daily closing basis, there is minor resistance at 8083 and a bit stronger at 8131. Above that level there is resistance at 8281 and again at 8375. On a weekly closing basis, support will now be found at 8046/8001. Below that, there is nothing until major support is found at 6627. On a daily closing basis, support is minor between 7920-7957, again at 7842/7887, decent at 7790, and strong between 7522 and 7552. Major support is found at 6547.

It must be mentioned that the DOW got up to the 8000 level 3 weeks ago with a rally up to 8076. Since then, though, the index has only been able to go up intra-day to 8191 (115 points additionally). It is evident that the upward momentum has died down even though the news has been generally positive and many stocks have continued to rally due to positive earnings reports. It is also important to mention that there have been quite a few analysts that have been predicting that this is the start of a new bull market. As such, the lack of further upside movement must be considered particularly indicative.

This past week the index received strong selling on Monday which, based on the daily closing charts, resulted in sell signals being given. The sell signals were not negated during the rally in the latter part of the week as the DOW was unable to go above, or close above, the high seen two weeks ago. As such, it has to be believed that selling will likely come again this week, likely on Monday, especially after the clear failure to make new highs was seen on Friday.

This coming week there are quite a few important reports that could have an impact on the market. The most important are Tuesday's Consumer Confidence (rated a B), Wednesday's GDP (rated a B) and Friday's ISM (rated an A). It must be said that these reports are already anticipating some kind of a recovery and are already expected to be much better than the previous month's reports. Such anticipation could be a two-edged sword as there is now room for these reports to come in worse than anticipated. Since these reports are month to month and earnings reports are per quarter, they don't have a lot of room to be much better than anticipated, such as many of the earnings reports were. Negative surprises could be seen.

Based on Friday's action, it is clear that Friday's high of 8128 will be a resistance level of note. If the index is able to get above that high it will probably get above the previous weeks high at 8191. If that happens, the likelihood of a rally up to the next resistance of consequence between 8281 and 8375 will increase. By the same token, a failure to get above 8128 will put the weeks low at 7793 at risk of breaking. In looking at the lower weekly close as well as the failure on Friday, I would have to say the possibility of a trading range between 8076 and 7522 is high.

NASDAQ Friday Close at 1694

The NASDAQ continues to be the index to follow for upside movement. It is the only index that did not generate a lower close than last week, and therefore must be used to gauge further upside objectives. It is important to note, though, that "major" resistance is now in close view and with a higher high being seen in this index, contrary to the other two, it is possible to see further upside movement this week, without seeing the same thing happen in the other two indexes.

The NASDAQ has now gone up 7 weeks in a row without any kind of a correction. Every week that goes by with a higher close increases the probability of a strong correction forthcoming. Major resistance on a weekly closing basis is now within 16-27 points (1710-1721). As such, with a close at 1694, it is possible the index will rally a bit further without the necessity of the other two indexes breaking above their previous highs.

On a weekly closing basis, resistance is strong at 1711 to 1721. Above that level there is no resistance on the weekly chart until the 50-week MA is reached up at 1920. On a daily closing basis, there is no resistance at this time until 1770 to 1780 is reached. The resistance at that level is strong, as there were 2 important closes at that level (1770 and 1780) as well as the 200-day MA presently at 1760. On a weekly closing basis, there is decent support at 1552, again at 1530 from a minor weekly close as well as from the 20-week MA. Below that level support is strong between 1476 and 1500 from a psychological basis as well as an important weekly close at 1476. On a daily closing basis, support is minor at 1626 and strong at 1608. Below that level, resistance is decent at 1562 and strong at 1500.

The NASDAQ shows no intra-day resistance until 1760 (200-day MA) is reached. Nonetheless, the resistance between that level and 1780 is of sufficient strength to say that it is not probable the index could go higher than those levels without a major correction coming first. Further upside is expected to be seen this week, as there is no resistance intra-day between Friday's close and the levels mentioned above.

The index did give a sell signal this past week when it closed below a decent support level at 1626. Nonetheless, that sell signal was negated when the index was able to get above and close above the previous highs. It is likely that strength will continue to be seen this coming week, even if the other indexes do not follow suit.

It is important to note, though, that it is not necessary for the index to close higher next week as the close this week at 1694 is sufficiently high enough to serve as a successful retest of the 1710/1721 weekly close resistance. This could mean that the index could see intra-week strength but end up with a lower close next Friday. Such a scenario has a high probability rating.

I do believe the NASDAQ will once again be the strong index this week. Possible trading range for the week is 1770 to 1664, with a close next Friday at 1673.

S&Poors 500 Friday close at 866

The SPX was unable to get above a strong intra-week resistance level at 875/877 on Friday in spite of the fact that more financial institutions reported better-than-expected earnings this past week. This was the third rally up to that level since January 28th and it shows that there is strong selling at that price. In addition, the index did close lower than last week giving indications that perhaps the top of this recent short-covering rally has been found.

It is evident, based on the fact the index is so close to that resistance level, that some type of decision will be made this week. The trading range has shrunk to the point that any rally or drop in price of more than 20 points in either direction will likely generate strong follow through.

On a weekly closing basis, resistance is very strong at 868-872 from two previous low closes of consequence as well as the last high weekly close. Above that level the next weekly close resistance is found at 931. On a daily closing basis, there is decent to strong resistance at 869/874. Above that there is no strong resistance until 934. On a weekly closing basis, support is decent at 825, strong at 800, and then nothing until major support is reached down at 683. On a daily closing basis, support is now strong at 832 (most recent low close and 100-day MA), minor at 815, decent to strong at 805, and strong again at 787. Below that level, support is strong at 752 and major at 676.

The SPX shows no resistance above 878 (875 on a daily closing basis) until 930 is reached. It is evident that a break of that resistance will bring in strong buying, at least for a few days. Nonetheless, based on the red close this past week and the probabilities the indexes may be topping out, it is also very possible that the index could spike up but end up giving up all the gains by next Friday, closing below this week's close. Much will depend on what the NASDAQ is able to do this week as that index has already broken above the same type of resistance that the SPX is presently facing.

It is evident that Friday's range between 853 and 872 will be the key on Monday. A break below Friday's low of 853 will make Friday's rally look like the last successful retest of the highs. By the same token, a break above 872 will confirm that strength seen this past week is likely to continue, thus generating a strong buying frenzy in the index.

It is important to note, though, that somewhere along the line the 800 level will need to be tested, as that has been a major pivot point for the last 12 years. At this moment any further rallies will begin to receive strong selling, whereas strong dips will not be as supported until the index gets below 800 once again.

At this time, it is difficult to have a strong opinion on what the index will do on Monday. In looking at the other indexes, the picture is mixed with the NASDAQ saying higher and the DOW saying lower. Nonetheless, the probabilities seem to favor a failure as it is not likely that much more help will be seen this week, as far as earnings and economic reports are concerned. Possible trading range for the week is 870 to 817, with a close around 825.

The indexes gave mixed signals this past week, with the DOW and the SPX generating a red close and stating that its possible no further upside will be seen, and yet the NASDAQ stating the rally is not likely over. Either way the indexes trade this week, the probabilities are high that the top of the rally was seen this past week or will be seen this coming week.

There are several reports this week that could be strong catalysts. It must be mentioned that many stocks have shown better-than-anticipated earnings results over the past 2 weeks. Nonetheless, 3 months have passed since those reports came out the last time, and it is evident that things have gotten better, ergo much better numbers. Nonetheless, there are important monthly economic reports coming out this week that have "already" factored in much of the good news and therefore are less likely to show a very much improved outlook. As such, these reports could show a surprise on the negative side.

It is also important to note that a week ago Friday the indexes closed in new short-term weekly closing highs but on Monday the indexes received strong selling. With the successful retest of the highs this past week on 2 of the 3 main indexes, which must be considered a failure, it is certainly possible that strong selling will also be seen this coming Monday.