DOW Friday close at 8799

The DOW continued its upward climb generating another higher weekly close than the previous one, though on this occasion it was only by 33 points and in question right up to the last 10 minutes of trading. In addition, the weekly volume was the lowest seen since August of last year, and suggests that further upside will continue to be highly labored and limited. The bulls are not buying aggressively and the bears are on the sidelines.

The news proceeded to be as, or better than expected, keeping the momentum of the DOW on an upward slant. Dips continue being bought as there seems to be no fundamental or chart news suggesting that that the highs of the move have been reached.

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 did make a new 5-month daily and weekly closing high on Friday, but the trading was very subdued as the range for the entire week, from high to low, was 243 points, and only 36 of those points were new. Having made a new high this week, suggests that more upside should be expected next week (likely as limited as it was this previous week). Resistance does start becoming strong, on an intra-day basis, at 8923, followed with 8961, 9026, and very strong at 9088. It seems probable that the first level of strong resistance will be seen this coming week. Nonetheless, as these levels are reached selling should start to pick up. It is not expected that all of these resistance levels can be breached at this time, and therefore it is likely that one of them will become a short-term top, from which a correction of some consequence will occur.

The action for the next couple of weeks should continue to be as boring and limited as it was this past week, unless some unexpected news comes out. Nonetheless, due to the extraordinary amount of new money made available by the Fed in recent months, inflation worries have started to become a topic of conversation as well as the possibility of the Fed raising interest rates sometime in the not so far future. These topics could continue to gain strength and become a negative catalyst.

This coming week (Tuesday and Wednesday) the PPI and CPI numbers for May come out and they will be closely watched for clues. If those numbers are higher than expected, they could have a negative effect on the indexes.

Probable trading range for the week is 8717 - 8961.

NASDAQ Friday Close at 1859

The NASDAQ continued to move up this past week making a new 8-month daily and weekly closing high on Friday. In addition, the index also confirmed the break above the 50-week MA with a second close in a row above that line.

The NASDAQ is nearing a resistance level of some consequence in the form of a major weekly gap the index left on the way down between 1947 and 1905. Nonetheless, now that the index has been able to generate a confirmed close above the last daily close resistance at 1844, there is nothing to stop the index from getting up to that level, perhaps as early as this week.

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 an intra-day basis, there is strong resistance at the gap area between 1905 and 1947, as well as some decent resistance at 1897 from a previous high. On a weekly closing basis, minor support will be found at the 50-week MA at 1792. 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 has no resistance whatsoever until 1897-1905 is reached and it is highly likely the index will be heading up to that level this coming week. Nonetheless, that is a resistance level of consequence as well as an area that will probably end up showing whether the indexes are in a bear market correction, a sideways trend, or the beginning of a bull market, in simple words, an area of great importance.

Weekly gaps are very rare indeed and they often represent the price level at which a market generated a major breakdown. Weekly gaps are generally not possible in the DOW or the SPX but can be found in the NASDAQ. As such, it is likely that this index, as well as the area in question, will be of great importance to the market in general, as this type of gap is generally well defended and indicative.

Nonetheless, what the index does at the gap area the first time around won't necessarily mean much, as it is highly likely that the bears will have a successful stand the first time around, especially since the index is so overbought and in need of a correction. In the longer term, though, should the gap be closed, the bears will know that the recent strength seen is more than just hype, smoke, and mirrors, but that some true recovery has occurred. Further upside would likely follow. Nonetheless, should be gap ultimately not be closed, the possibility of the strength of the last 4 months being simply a bear market correction will increase dramatically.

Closure of the gap, though, will likely mean the index will be heading up to the psychological resistance level at 2000 and perhaps as high as 2100, where past resistances are once again seen. Should the gap be closed, the probability of new lows in the index will likely disappear and the question will then become whether the market will be going through a sideways phase and the lows still to be tested, or whether this is truly the beginning of a bull market.

Probable trading range for the week is 1897-1857.

S&Poors 500 Friday close at 946

The SPX was able to close on Friday above the weekly high closes seen back in the last recession in 2001/2002 at 936 and 940, with a close at 946. It is evident the index is likely heading up to the next, and most recent, weekly high close resistance, as well as 50-week MA, up at 968.

Like with the other indexes, further upside is likely to be seen this coming week. It is important to note, though, that the index was able to close above a weekly close resistance level of consequence at 940 and the resistance level above is not as strong as that level was. As such, if it possible that the financial industry will see some additional strength this week.

On a weekly closing basis, resistance is decent 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.

Though the close on Friday was above the important weekly close resistance at 936/940, it is still possible that next week this break will not be confirmed with a second weekly close above that level. It is also important to note that even though the weekly close resistance at 968 is only decent, the resistance gains some strength from the fact that the 50-week MA is now down at that level as well. As such, it is possible that no further upside will be seen, on a weekly closing basis, above 968.

For the last 3 weeks of trading, though, the index has traded in a very narrow trading range between a low of 923 and a high of 959. Such a narrow and consistent trading range does lend itself to the possibility of a spike high occurring soon. With the index closing on a new 5-month daily and weekly closing basis on Friday, further upside is to be expected this week. On an intra-day basis, there is no resistance, other than the 50-week MA at 968, until 985 is reached. A sharp and fast rally up to that level could end up being a spike high if the index then closes next Friday at 968 or lower.

Nonetheless, in looking at several financial stocks, the chart formations seem to favor a breakdown this week. If that breakdown occurs, it is unlikely that the index will rally and the breakout seen on Friday could be negated next week. Keep an eye on the following stocks for clues: MS (28.63/30.15), JPM (34.47/35.87), and GS (144.15/147.35). A break above or below those levels will likely generate follow through in that direction.

Probable trading range this week is 940-970.

Right across the board the indexes seem to point to slightly higher numbers this week, within a very small and boring trading range. The PPI and CPI numbers coming out on Tuesday and Wednesday could have an effect, though the probabilities favor "as expected numbers".

Very important resistance levels in all three indexes are close by and an increase in selling should be seen as they are approached. As such, if volume starts to pick up, the probabilities will favor downside action. Limited upside is likely but if there are any surprises, they will likely be to the downside.