DOW Friday close at 8763

The DOW continued its inexorable climb upward generating the 11th positive weekly close out of the last 13 weeks. The index has rallied a total of 2369 points over those 13 weeks and has not yet seen any kind of attempt at a retest of the lows or even a correction of consequence. In addition, there really isn't any resistance of consequence above until the 9029-9088 level is reached. As such, the possibility of further upward movement is high.

The index is laboring to go higher, though, as Friday the market received a very positive drop in the non-farm payroll number and opened strongly, only to give up most of the early morning rally at the end of the day. In addition, the volume continues to be extremely low, suggesting that the buying is sparse and limited.

On a weekly closing basis, strong resistance is found at 9035 and even stronger up at 9325. On a daily closing basis, decent to strong resistance is found at 8924/8936 and stronger at 9035. On a weekly closing basis, support is decent at 8515, strong at 8269, and strong again at 8046. On a daily closing basis, there is minor support at 8675, and strong support between 8269 and 8300. Below that level strong support will be found between 7937 and 7957.

The DOW continues to receive positive news and as long as that happens, it is unlikely the bears will be successful in generating any kind of correction to this 3 month rally. Nonetheless, the upside is becoming very labored and with strong resistance now within 300 points of Friday's close, it seems evident that the sellers will start getting a bit more aggressive as the resistance levels are approached. It is important to note that up until now, the resistances encountered have been from previous lows, and therefore not as strong. Nonetheless, the resistance between 9029 and 9088 is the "first" intra-week resistance of consequence based on previous highs. As such, especially with such an overbought condition, the probabilities of getting through that level are minimal at this time. In addition, such a level should generate a strong profit-taking and correction phase.

Under this scenario, the DOW should continue to move higher for the next week or two until those levels are reached. Nonetheless, I have discovered a possible short-term "monkey wrench" that could temporarily derail continuation of the rally at this time. I have gone back and researched the action seen in the month of June for the last 10 years (since 1999) and have discovered that in 6 out of the last 9 years the high for the month was made in the first week. In 2 of those the remaining 3 months, the high made after the first week was less than 120 points with 2003 being 120 points and 2004 being 55 points. Only in 1999, was the DOW able to generate more of a rally, seeing the index go up a total of 330 points from the high seen the first week. It is important to note that in those 3 years the DOW rallied in June, the index was in an "established" bull market after the lows had been tested successfully, something that has not happened on this occasion.

Either way, though, the action in June has generally been quite mild over the years, as the average trading range for the month, between high and low, has been 470 points. Only on the 3 years where a recession was in full bloom (2001, 2002, and 2008), did the index get out of that range with an average drop during the month of 1220 points.

It is probable that the market is no longer in a recession and therefore the probabilities favor a mild month. The question now is whether the action will be like 1999, with 400 point trading ranges each week, a slight upward bias, and a end result of 300+ points from the high made the first week of June. Or whether it will be like the other years where the high was made the first week of the month and a slight downward bias was seen for the rest of the month. If so, the 8839 high seen last Friday, could signal the high for the month.

I have no personal thoughts at this time regarding which scenario outlined above is the most probable. Nonetheless, having studied most of the probabilities, at least I have a clear guideline of the options possible. Either way, though, it is highly unlikely the index will be able to get above 9029-9088, even under the most advantageous situation. As such, positioning oneself for a correction is the way to go.

NASDAQ Friday Close at 1849

The NASDAQ continued to lead the indexes to the upside as it gapped up this past week, above the 50-week MA, and closed near the highs of the week. The NASDAQ is the only index that has been able to get above and close above the 50-week MA. In addition, the index successfully confirmed last week's break of the previous high weekly close at 1739, thus giving the index a path with no previous resistance of consequence until the 2000 psychological resistance level is reached.

The next objective to the upside is the major open gap that was left on the way down between 1905 and 1947. That gap is now a magnet and attempts to reach it are now highly likely. Nonetheless, the gap will act as strong resistance and failure to close it will be taken as a strong negative, especially since there is no other resistance at that level.

On a weekly closing basis, there is no resistance until the psychological resistance is reached at the 2000 level. On a daily closing basis, there is no resistance until the psychological resistance at 2000 is reached. Above that level there is minor resistance at 2092. Strong resistance is between 2260-2279. On a weekly closing basis, minor support will be found at the 50-week MA at 17.92. Below that, there is decent support at 1680. On a daily closing basis, there is very minor support at 1826, and minor again at 1731. Stronger support is found down between 1684 (200-day MA) and 1692 (most recent low close of some consequence).

The NASDAQ was able to close above the last daily close resistance of the last 8 months at 1844. Nonetheless, the close was not by a sufficient amount (6 points) as to confirm a break of resistance. In addition, the index failed to confirm Thursday's break by closing in the red on Friday. As such, it is still possible to say that the last resistance is still applicable. If the DOW high for the month was generated on Friday, as explained up above, the NASDAQ will close in the red on Monday and likely not attempt to get up to the gap area for the next couple of weeks.

It is important to note that closure or failure to close the gap in the 1905-1947 gap in the NASDAQ is likely to be a big clue as to the status of the indexes overall. Many analysts are saying the indexes are in a bull market, while many others are saying the market will still make new lows. In looking at the 12-year chart of the NASDAQ, it has been shown that the index has seen a trading range between 1350 and 2100 on more than a couple of occasions during that time. Each time the index got down near to 1350, the subsequent rally took the index up near the 2100 level. If the gap at 1905-1947 fails to close, it could easily mean the index has not yet seen its lows for this year. This is evidently not something that is very important this week or for the next 6-8 weeks. Nonetheless, that gap will continue to play an important part in the future outlook for the market. As such, close attention should be paid to that fact.

Monday is likely to be important on a short-term basis. A green close on Monday in the NASDAQ will likely mean further upside will be seen over the next couple of weeks, while a red close could mean the indexes will be under some selling pressure for the month.

S&Poors 500 Friday close at 940

The SPX failed to generate as much upside this past week as the other indexes. The SPX only went up 2.3% this week, while the DOW went up 3.1% and the NASDAQ up 4.1%. It is evident that the index is having a lot more problems rallying from these levels than the rest of the market. It was seen this week that the financials had problems generating any further upside and that levels of resistance in that industry are strong. In addition, the SPX does show past resistance of consequence at the levels reached this week. As such, further upside seems to depend on news and no longer on momentum.

On a weekly closing basis, resistance is very strong at 940. Above that, there is minor to decent resistance at 968 and then nothing until the psychological resistance at 1000. Above that there is nothing of consequence until 1157. On a daily closing basis, there is decent to strong resistance at 985 and very strong at 1003/1006 from a double top at that level. On a weekly closing basis, support is decent to strong between 876 and 882 and the nothing until minor support at 825. Strong support is at 800. On a daily closing basis, minor to decent support is at 931, and decent to strong support between 900 and 907. Strong support is found between 864 and 882.

It is important to note that during the last recession in 2001/2002, the SPX had 2 important weekly closing highs at 936 and 940. Both of these closes were accomplished after the index rallied up from the mid 700's. Both of these closes also generated downside action thereafter back down to the mid 700's. As such, Friday's close in the SPX at 940 has to be considered likely significant. In addition, the intra-week highs during those 2 periods were 965 and 957. With last week's intra-week high of 952, it is possible to say that the high of the rally might have been seen. Nonetheless, these closes were on the weekly closing chart, on the daily closing chart the index did generate a closing high of 963 in 2001 and a closing high of 944 in 2002. This could mean that some further upside could be seen this week, intra-week.

It is evident, though, that the SPX is having more problems going up from here than the other 2 indexes. The financial sector seems to have lost its momentum and is no longer rallying, as so many other sectors of the market have been doing during the last week or two. As such, the index is starting to work as an anchor and unless some strong positive news is released that is specific to the financials, it is likely that the index will have trouble going higher.

Once again the indexes seem to be giving conflicting chart pictures, with the NASDAQ showing the likelihood of higher prices, the DOW showing that the upside is likely limited, but still probable, and the SPX giving signs that further upside is unlikely. Either way, all indexes are having problems generating much new buying as the volume is extremely low and rallies are becoming very labored.

The month of June is not likely to bring strong action either way, as it is the middle of the summer doldrums period. It is also not likely that much will happen, in the way of major news, until the new earnings period starts in July. As such, June will likely be calm with general direction for the month being decided upon this coming week. Nonetheless, even if the indexes decide to go higher, resistance levels of consequence in all indexes are close in view. As such, rallies will now likely be limited.

I do want to mention that the indexes are now getting to levels where major clarification of the status of the trend will be in play. There are many analysts saying we are in a bull market, and many analysts saying that this was just a bear market short-covering rally and that new lows will be made. The likelihood is that neither of these two parties are correct and that a wide-ranging but sideways trading phase, is in place. If in a sideways phase, the likely parameters are in the DOW between 7000 and 9000, in the NASDAQ between 1400 and 2000 and in the SPX between 750 and 1000, give or take 1%-4% either way. This clarification will likely become evident within the next few weeks or couple of months at most.