DOW Friday close at 8281

The DOW did an about face on Thursday when Obama's Stimulus bill began to be debated on Congress and faced likely passage. In addition, there was an announcement on Thursday that Treasury Secretary Geithner will be unveiling on Monday a package to help the beleaguered financial industry. Both of these happenings helped generate a strong 2-day rally as the bears in the market stopped selling aggressively due to the "possible" positive nature of these events.

Nonetheless, there is still a lot of uncertainly in the market, even with passage of the bill on Friday evening, as many view the bill as negative or non-effective. In addition, we still have to wait to see what Geithner's financial aid package to the financial industry contains. Until everything is "out on the table" (likely Monday afternoon), it is impossible to give credence to the rally seen at the end of the week or to anticipate direction this coming week. It must also be mentioned that just prior to these announcements being made, the indexes were showing quite a bit of weakness as the DOW was making new 2 ½ month lows, on both an intra-day and daily closing basis.

On a weekly closing basis, resistance is minor at 8516 and strong at 8829. On a daily closing basis, resistance is strong at 8375 and then nothing of consequence until strong resistance is found at 8924. On a weekly closing basis, support is now strong at 8000/8046 and then you have to go back to 2003 and decent support at 7740 and to 2002 for the lowest weekly close and major support at 7528. On a daily closing basis, support is now strong between 7935 and 7957 and minor at 8078.

On a daily closing basis, the DOW now shows strong support at 7935/7957 and strong resistance up at 8375. It is evident that whichever of these two levels get broken in the next day or two, the index will continue in that direction. At this time it is impossible to give any probability numbers as the direction of the market will depend on how the two events mentioned above will be evaluated fundamentally by the traders. At this particular time, the direction of the market is more about perception of the future than about technical or chart trading.

Nonetheless, it must be noted that neither of these two events is likely to produce a major rally at this time, as problems presently existing in the economy are still severely negative and not likely to go away anytime soon. Rallies will still be met with selling and upside movement, other than on a very short-term basis, will likely be labored. On the other hand, if the market shows any displeasure with the news, drops could be strong, fast, and aggressive, as there are few other solutions that are available at this time.

It is very evident that this coming week is of major pivotal importance as all the news that can have a major effect on the market will be out. I can see the DOW moving up this week to 9000 as easily as I can see a drop down to 7000. The direction will likely be decided by Monday's close.

NASDAQ Friday Close at 1476

The NASDAQ reacted much more positively this week than any of the other indexes as it was able to generate a classic reversal week with lower lows, higher highs, and a close above last week's high. If the market were presently reacting technically and chart-wise, this index would be giving a strong buy signal. Nonetheless, the action is very suspect as it was generated mainly by a change of perception rather than by actual news or technical/chart buying.

It is evident, though, that the index has built a chart formation that whichever direction is chosen by the traders this week will likely generate strong movement in that direction. With the reversal week, both a re-test of the lows as well as of the recent highs has been accomplished. Under this chart scenario, the chart is ready to support the index either way it goes.

On a weekly closing basis, support is now very strong at 1476 and still major at 1384. On a daily closing basis, support is still strong at 1500 but now strong again at 1476. Below that, support is decent at 1441, strong at 1398 and major at 1316. On a weekly closing basis, Resistance is very strong at 1632 from both a recent high close as well as from the 20-week MA. Further resistance of consequence is seen at 1721. On a daily closing basis, minor to decent resistance is seen between 1590 and 1600, and very strong at 1652 from the highest close in 3 months as well as from the 100-day MA.

The NASDAQ was able to get above the most recent high daily close of consequence at 1558 (unlike the DOW) and will likely rally the strongest of all the indexes should it be able to take out the resistance at 1652. Like with all the indexes, the NASDAQ has been trading in a sideways range for the last 3 months between 1652 and 1476, on a daily closing basis. Nonetheless, it is probable that after all the news is made public on Monday, the index will get into a short-term trend of some consequence.

The NASDAQ has an open gap between 1636 and 1625 that based on the passage of Obama's stimulus bill on Friday will likely be tested and closed on Monday. Nonetheless, It is not likely that much more will happen until Geithner's still to be stated aid package to the financial community is unveiled. At that time, if the index is able to get above the most recent intra-day high at 1666, the index will run. If not able to do that, a strong sell-off will likely occur.

Like with all the other indexes, the direction of the NASDAQ for the next few weeks will depend entirely on how the news is evaluated by the marketplace. Any moves after the news is out, should be followed.

S&Poors 500 Friday close at 868

It is indicative that this past week SPX did not even get close to the 800 level (low was 812) and in the end got up to a very important resistance level, on a daily closing basis, at 874 (high was 870). The action this week will be seen as a successful re-test of the most recent lows when the index got down to the 804 and tested successfully the very important psychological support at 800.

It is very clearly evident on the chart of the SPX, that this index is the "key" to the market and whichever way the index moves from the levels seen these past two weeks, will determine the short-term direction.

On a weekly closing basis, resistance is decent at 872, from an important previous low weekly close, and strong again at 911 from the 20-week MA. Above that level, resistance is strong 931 from an important weekly closing high, and then again at 968 from the highest weekly close in 3 months. On a daily closing basis, resistance is very strong an important at 874. Above that level there is no daily close of consequence until another strong resistance is found at 911, from several previous daily closes at that price. The strongest resistance is up at 931 where the highest daily close is 3 months, as well as the 100-day MA, is found.

It must be noted that the SPX has been testing the 800 level successfully since its major drop on November 17th. The 800 level is a major psychological support level that if broken will cause disappointment and selling. The index has been very successful in staying above the 800 level for the last few weeks. If the news this week is strong enough to generate a rally above a recent intra-day high of 877, as well as close above an important daily close at 874, it is likely the recent 3-months highs will be tested. In addition, a concerted short-term rally lasting a couple of month could occur.

The parameters are clearly evident with 874 and 800 being the two daily closing levels that will likely generate further action in that direction, should they get broken. It is important to note that last week's close at 825 is now being considered a successful re-test on the weekly closing chart. That re-test was needed in order to give the index the ability to generate a more lasting rally that could take the index back up to and above the 1000 level.

The stage is totally set for some kind of decision to be made this week. After Monday, all possible fundamental news of consequence will be out in the public eye and based on the evaluation by the traders it is possible that a more consistent and longer lasting trend will be seen. Whether it is to the downside or upside is still an enigma.

The past 3 months have been very difficult for traders as the indexes have not been able to set any kind of trend that would allow for consistent profits. The fundamental information has often been very negative but the hopes for the future with the new administration have been high.

With the first step in the process now in the final stages of development it is now up to the traders/analysts to analyze, evaluate, and determine if the plan has a fair chance of success. For the past few weeks, the action has been choppy and without any kind of follow through. It is now clearly evident that after all the plans are unveiled (likely by the end of Monday), that the indexes will get into a better defined plan of action.

It is impossible as of this writing to form an opinion as to what will happen this week. Nonetheless, be assured that whatever does happen, it will have some degree of follow-through.