DOW:: R1=12894

$SPX:: R1=1407

NASDAQ:: R1=2420, R2=2487 and R3=2563

$OEX:: R1=653

We are currently in a rebound rally and if price drop has been any indication of volatility, this bear rally should be equally volatile and furious. We will try and focus on the likely resistance levels based on the drop of the last 13 months.

MHP Daily Chart

This rally was started when Wells Fargo Bank announced higher earnings than anticipated as well as a raise in dividends. In an industry that has been battered down mercilessly, the unexpectedly surprising news came at a time that the market was on its back and ready to collapse. A big weight has now been lifted and a strong short-covering rally has ensued.

The DOW did get deep into the area of support between 10700 and 11000 as Tuesday’s low was 10828. Nonetheless, this is a strong area of support that was expected to hold, as it had held firm for almost 1 year back in 2005/2006. It is now probable the DOW is in the process of rallying up to the top of that 1-year trading range up at 11670.

Resistance is very strong on a weekly closing basis at 11578, and at 11643 on a daily closing basis. Intra-day the resistance is found at 11670. Additional resistance will be found at the major intra-day low made in March at 11643 (11741 on a daily closing basis). Decent support on a daily closing basis will now be seen at 11375 (20-day MA and two previous closing highs). Some support from back in 2005-2006 is found between 11240 and 11280, though nothing at that price on this recent move. Also on a daily closing basis, minor support is seen at 11216 and 11147. Strong support will be down between 10978 and 11039. Major support continues to be down at 10700.

With the confirmed breakout above the 20-day MA on Friday, as well as a close on the highs of the day, it is likely that the DOW will see upside follow through the first part of the week. Some weakness might be seen in the middle of the week and a likely rally and higher close than this week next Friday. Rallies up to the 11670 over the next week or two are not only possible but, probable. Nonetheless, we are at the beginning of the earnings report quarter and choppy trading continues to be likely. The rally up to the 11670 could take as much as 1-3 weeks to accomplish and the index could trade choppily, but with a slight upward bias. It is expected that for the next week or two the volatility will ease. Nonetheless, it is important to note that the major resistance on a weekly closing basis is 11578 and therefore it is unlikely that the index will close above that level on any Friday.

The probability of the DOW being in a relatively small trading range of 400 points between 11670 and 11240 for the next couple of weeks is high. First of all, the oversold condition needs to be addressed and that won’t happen with a one-week rally. In addition, the earnings reports are likely to keep the market choppy but with an upward bias as some of the more important earnings reports are already out. Probable trading range for the coming week could be 11329 and 11586.

NASDAQ Friday Close at 2282

The NASDAQ took a back seat to the DOW on Friday as it closed in the red versus a green close in the other two indexes. I believe the reason is clear, inasmuch as this index just recently broke below its 200-week MA (currently at 2302) and unlikely to close above that line without the other indexes doing the same. The same 200-week MA in the DOW is at 11690 and in the SPX it is at 1320. Because the other indexes still have a ways to go to reach that MA, but the NASDAQ is close by, it is likely the index will be the laggard during the next couple of weeks.

It is now been stated and clearly defined that the indexes are in a bear market and the 200-week MA must be considered the major pivot point in such a scenario. As such, and during the next couple of weeks while the indexes are shedding some of the oversold condition and enjoying a short-covering rally, it is likely the NASDAQ will under perform and keep itself, on a weekly closing basis, below 2302.

On a daily closing basis, resistance is minor at 2312. Resistance is major, at 2341-2343, and again strong at 2357. Intra-day major resistance is at 2367. On a daily closing basis, support is quite strong at 2276 and again 2259-2261. Some support is found at 2243. Strong and important support down at 2213 and major at 2169. Intra-day support is strong between 2256 and 2266.

Due to the importance of the 200-week MA, it is unlikely that the NASDAQ will be able to generate a strong lasting rally any time during the next two weeks. Nonetheless, tt is possible that if the DOW rallies intra-day to 11670 that the NASDAQ will reach 2347 intra-day. The index, though, may be unable to maintain those rallies on a daily closing basis.

If the DOW closes higher next week as anticipated, it is likely the NASDAQ will also close higher. Nonetheless, it is unlikely that on a weekly closing basis, that the index will close above 2302-2304 at any time.

Trading range for the coming week could be 2266-2312.

S&Poors 500 Friday close at 1260

With this past week’s higher close, the SPX confirmed that the previous weeks’ close at 1239 was a successful re-test of the important weekly closing support at 1236. In looking at the weekly closing chart, it has been shown that for a period of almost a year, back in 2005-2006, the SPX traded between 1236 and 1288 for almost 70% of the time. It is possible that the same scenario could occur once again.

It seems likely that the SPX is now in a short-term corrective phase and that the primary objective is a rally up to 1288. Nonetheless, it is important to note that the SPX is under more pressure than any of the other indexes as many of the stocks in the index are in industries that are fundamentally weak.

Using the daily chart, resistance is decent at 1274, where a recent previous high close as well as the 20-day MA is seen. Resistance is a bit stronger up at 1280 as there are several important daily closes from 2006 at that price. A bit more resistance is found at 1288-1294 and major resistance up at 1326. In using the weekly chart, the resistance at 1270 has the same importance but then the 1288 level becomes much stronger as there were in excess of 3 weekly high closes at that price in 2005/2006. Above 1288 there is no resistance of consequence on the weekly closing chart until 1307. Major resistance is also found at 1326.

The difference between 2005/2006 and now is that in the past the index was in a bull market up-trend and dips were being bought aggressively. Now the index is in a bear-market downtrend and on the defensive and trying to hold on to supports. This fact was illustrated this past week when the index did drop as low as 1200 (strong psychological support) before the index turned around. In 2005/2006 the low was only 1219.

It seems likely that for the next week or two that the SPX will be testing the resistance levels above, while shedding some of the oversold condition. Keeping a close eye on the weekly closes during the next few weeks and comparing them to what they were back in 2005/2006 will help give a clear assessment of how severe this downtrend might be this year. Any weekly close below 1236 will signal further downside while a weekly close above 1288 will help alleviate the severity of the downtrend. Probable range for the week in the SPX is 1225-1277.

During the next few weeks, the brunt of the earnings reports will be seen and therefore surprises on both directions could give the indexes some volatility and could affect chart evaluations. Nonetheless, the possible anticipation that many companies could show that things are not as bad as previously thought, may help the market calm down during this period of time.

It is evident that the strong selling pressure subsided during the latter part of last week and though all strong rallies will still be sold, the next few weeks should be calm, while the marketplace goes through a corrective phase.

The DOW is in a bear market scenario but in very oversold condition and in dire need of a corrective phase where. The sellers are probably looking to take profits and re-sell at a higher level where they can control their risk efficiently. With all the bad news hitting the market in the last two weeks there doesn’t seem to be much more news that could affect the market negatively, other than surprisingly bearish earnings reports. Nonetheless, the DOW has been forced to continue to go downward as there has been no positive news of offset the negatives. Until such a time the index reaches levels from the past where strong support is confirmed all rallies will be sold.

It is important to note, though, that the DOW has now gotten to the top of a previous and strong support level between 10700 and 11000 that is of consequence. This support level was in place for 10 months between Nov05 and Sep06 and not likely to get broken easily.

On a daily closing basis, support is decent between 11074-11109, decent again at 10956-10974, and then very strong at 10706-10739. On a weekly closing basis (Friday’s), support is decent between 11088-11109, minor at 11022, strong at 10739, and strong again at 10669. On a weekly closing basis, resistance is decent at 11240-11280 and very strong at 11578. On a daily closing basis, resistance is also strong between 11240 and 11280 and major at 11643.

It is evident that the DOW has now begun to reach levels of support from which a short-covering rally will likely occur. Nonetheless, it is still not known which of the support levels mentioned above will be the one from which the rally will begin. On Friday the DOW closed at 11101 and that was right at the first support level on the weekly closing chart. Whether the index heads down to the next level of support or not, is not something I can tell right now. Certainly a trading range for the next few months between 10700 and 11640 is likely but on a short-term basis nothing has yet been decided.

It is likely that the volatility will continue this coming week but that the trading range will shrink. On an intra-week basis, I can see a trading range this coming week between 10902 and 11335. In looking at the weekly chart I would expect the index to be under pressure at the beginning of the week and go below this week’s low at 10978 down to perhaps 10902. I would then expect the index to show some strength toward the latter part of the week with a rally up to 11335 and close out the week between 11240-11280.

Keep in mind that this is still a bear market and rallies will be met with strong selling. In order to generate a “consistent” short-covering rally up to the 11600 area, it is likely the DOW will have to go through a base building process first. At this moment, there is still a higher probability of a drop down to 10700 first than a rally up to 11600.

NASDAQ Friday Close at 2239

Once again, the NASDAQ is likely to be the chart to follow this coming week as it is the only one of the indexes where the March lows have not been broken. It is evident this most recent fall in the indexes has been caused by higher oil prices, crumbling financial institutions, and inflationary increase in commodity prices. Nonetheless, the NASDAQ has continued to outperform the other indexes by staying above its March lows. It is the only index where supports can be relied upon to give a true picture of how these factors are truly impacting the market.

It is evident that if the NASDAQ breaks down and makes new lows that whatever confidence is left among traders, regarding the possibility of a bottom being in the process of being made, will suffer a strong setback. As such, the NASDAQ must be the index to monitor if you are a bull.

On a daily closing basis, support is major between 2169 and 2177 and some decent support at 2205. On a weekly closing basis, support is major between 2205 and 2212. On a daily closing basis, resistance is decent at 2264-2268, stronger at 2293, and major up at 2354-2371. On a weekly closing basis there is decent resistance at 2300 where the 200-week MA is currently located and major resistance up at 2343. On an intra-day basis, there is an important support at 2203 that was tested on Friday and from which the index generated a strong bounce.

The NASDAQ did get down to 2203 on Friday but a gap between 2201 and 2203 was left unclosed. It is likely that gap will continue to act as a magnet and that it will be closed at some point this week. Intra-day drops down to the 2187-2190 level would then likely happen.

Based on the daily closing chart, it seems probable that the index will be generating a daily close around 2205-2212 at some point this week. It is therefore likely that in the early part of the week some follow through weakness, from last week’s drop, will be seen. By the same token, it also seems probable that if the indexes are reaching at least a temporary bottom, that next Friday the NASDAQ will close higher than this week and give, on the weekly chart, a successful re-test-of-the-lows signal.

Possible range for the week could be 2187 to 2283 with a close next Friday above 2239.

S&Poors 500 Friday close at 1239

The SPX did manage to close on Friday above an important weekly close support at 1236, thus opening up the possibility that if the index closes higher next week that it will seen as a successful re-test of that support level. This was a level that if broken, on a weekly closing basis, would have opened the door to another strong drop in price this coming week. By closing above the 1236 level it likely means the stock is near a short-term bottom from which a rally could occur.

The SPX does have a history of trading for quite a long time at these levels between 1219 and 1298 with breaks up to 1327 and down to 1168. From Oct05 to Sep06 the index traded between 1168 and 1327 but in reality 70% of the time the index traded between 1219 and 1298. It is likely that the same trading range will be seen this time.

On a weekly closing basis, support is strong at 1236 (1219 intra-week), stronger at 1168-1187, and major at 1143. On a daily closing basis, strong support is found at 1236 and then again at 1224. Below that, though, there is some minor support at 1205 and then nothing until the 1168 level is reached. Resistance on the weekly chart is strong at 1288/1289 and major at 1326. Some minor resistance is also found at 1270.

The SPX might give a clue on Monday as to whether the indexes will go below this past week’s lows or not. The charts on the other two indexes do show the probability is high of lower lows being seen this coming week. Nonetheless, the chart does show that if the SPX opens up on Monday at or above 1247 on Monday and does not sell off from there, that the rest of the week will be higher.

By the same token if that does not happen, it is important to note that the 1219 level intra-day is important support and if the indexes want to stage a late week rally, that level needs to hold.

Probable range for the week in the SPX is 1219-1270.

It is likely this coming week will be a transition week where new lows of this move will be made. Nonetheless, it is also likely that the support levels found here will hold up for a few weeks at least and that a short-covering rally will be seen within the next couple of weeks. I see the indexes still being under pressure on Monday and maybe on Tuesday, but by Wednesday rallies should begin to occur.

Expect volatility as the earnings report quarter has begun and each day there will likely be good news as well as bad news. Nonetheless, with the oversold condition of the markets and having reached strong levels of support, there should be enough buying coming in this week to prevent a further strong move downward at this time.

The DOW broke below the previous intra-day low at 11635 and got down as low as 11298. In addition, considering that the all-time high daily close last year was 14165 and that the close this past Friday was 11347, the DOW closed just a fraction above the 20% drop that is “officially” considered a bear market (closed at 19.89%). On an intra-day basis, though, that bear market can now be said to be in effect as the index has dropped 20.5% from the intra-day high made at 14198 to the intra-day low of 11298.

Nonetheless, the DOW was able to generate a mini rally late in the day and since the index is in such an oversold condition, it is possible that a small rally will occur before further downside is seen.

Resistance is now going to be very strong at 11670 (11643 on a daily closing basis). That was a high daily close seen on May 10th 2006 before a drop down to 10706 was seen (10699 intra-day). Other than that area, there is no resistance of consequence near-by. Support is minor at 11300, a little stronger as well as psychological down at 10970-11040, and very strong down at 10700.

With the oversold condition, it is possible the DOW will attempt some short-lived short-covering rally on Monday or Tuesday. A test of the resistance is possible, as sellers probably want to see where the resistance actually is before continuing to sell aggressively. Nonetheless, the index has broken down and the buyers are not only on the defensive but mainly running for the hills and therefore rallies will probably be the exception and not the rule. Selling rallies is what most traders are stating they will be doing.

If there is going to be a rally this week, it will probably occur either Monday or Tuesday as the index did show a bit of resiliency on Friday. Nonetheless, based on the weekly bar chart, the probabilities of the DOW reaching down to the 11000-11040 level this week is strong. Based on last week’s range, possible trading range for the week could be 11670-11040.

NASDAQ Friday Close at 2316

The NASDAQ broke down below the important support at 2373 this week and closed both the runaway and breakaway gaps at 2348 and at 2291 respectively. Nonetheless, once the index reached the 200-week MA at 2293 and after closing the breakaway gap at 2291, the index managed to rally 30 points from the low. If there is a early week rally in the indexes it will probably be generated by the NASDAQ as it is the only index that has been able to maintain itself above several important support levels and is still the index that will bring in some buying. Nonetheless, the fact the NASDAQ continues to outperform the DOW and the SPX likely means the indexes are still heading much lower.

The NASDAQ did leave a gap between 2376 and 2366 this past week and if there is a rally in the early part of the week, the index will likely try to close that gap. Nonetheless, this week’s gap could be considered the runaway gap in the chart as back in January 4th the index left a gap open between 2592 and 2571 and that gap might be considered the breakaway gap. When the fundamental picture is considered, such a formation fits in well with the news and would be a powerful chart formation that would not likely be reversed for months and/or years.

Resistance is strong between 2352 and 2364, as there are 6 prior intra-day highs and lows at that level. In addition, and probably more importantly, the 20-week and 100-day MA’s are both at that level as well making that whole area very strong resistance. Even if the gap is closed, there is major resistance at 2376 as that was a major high back in 2006 from which the index took a drop down to the 2000 level over the next few weeks thereafter. Support must be considered strong at 2290-2293, as that is where the 200-week MA is located as well as a previous daily and weekly close of some consequence. Using the daily closing chart, support is decent between 2261-2279, as there were 4 previous daily closes (2 highs and 2 lows) in that area over the past few months. Below that there is no daily support until the 2166-2177 levels are reached (2205-2212 on a weekly closing basis).

With the NASDAQ still being the index were the buyers are still showing some interest, this chart continues to be the one to follow. Nonetheless, should the index start breaking below the 2290 level things could get dicey. Back in 2001 the index broke below the 200-week MA but reversed itself almost immediately and rallied substantially above the line for the next 2 months, only to break that line a second time and generate a move down of 900 points within the next two months thereafter. The same picture seems to be repeating as the NASDAQ broke below the 200-week MA back in March but immediately reversed itself and generated a substantial move up thereafter. If the 200-week MA is broken again, it is possible that a like move could be seen this time as well.

I do believe the NASDAQ is the chart to watch closely this week with 2364/2376 on the upside and 2290 on the downside being “clearly defined” levels that will show what this index is likely to do. A rally upward toward resistance is likely to be the course of action at the beginning of the week. With no fundamental news of consequence due out this week, the traders will probably try to take advantage of the weak shorts that entered the market this past week. Nonetheless, if the resistance levels hold up, the sellers will likely get aggressive again and take the index back down and break the 200-week MA at the end of the week. Based on last week’s range, possible trading range this week could be 2364-2230.

S&Poors 500 Friday close at 1278

The SPX, like the DOW, broke below the 200-week MA and made a new 21-month weekly closing low. The index was able to maintain itself above the previous intra-week low at 1270 and 1257 as well as above the previous daily closing lows at 1273 and 1277 but on the weekly chart the index now looks to be on a break of support. Confirmation next week with another close below 1288 is needed in order to generate further downside.
<p</pSPX is widely followed among big traders as a chart leader and therefore this coming week will be very important for the long-term evaluation of the indexes.

Resistance will now be very strong between 1311 and 1318. The 200-week MA is currently at 1318 and the 1311 level is the last important daily low close support, which was broken this week. Minor resistance should be found at 1288/1289, as that was Friday’s high as well as the weekly close that was broken. Support will be strong between 1257-1270 on an intra-day basis but at 1273 on a daily closing basis. Below that there is no support 1219-1225 intra-day is seen (1237 on a daily closing basis).

Based on the close on Friday right at the middle of the trading range as well as the late rally, it is likely that on Monday and Tuesday the index will attempt a short-covering rally and perhaps a re-test of the 200-week MA that was broken. Nonetheless, the level from which the SPX broke down on Friday was 1304 and if the index is unable to get any higher than that, the selling will reappear in droves.

Possible trading range for the SPX this coming week 1304-1236.

Due to the small bounce on Friday it is possible that a small rally at the beginning of the week will occur. Nonetheless, it is also possible that the indexes will drop that additional 5% at the beginning of the week and then stage an attempt to rally toward the latter part of the week. Either way, it seems that the indexes will see lower prices this week. Holding or not above last week’s lows on Monday will determine which of the two scenarios will occur.

Since the indexes are now back in a downtrend, rallies will be sold aggressively until such a time that the fundamentals start getting better. At this time there does not seem to be any catalyst that will generate a rally of consequence.

This past week, on two different days, the DOW tested the 12069 previous intra-day and daily closing support. This was one of the possible objectives on the downside. After being unable to break below that level, the index generated a rally on Friday and closed above the most recent high close at 12290. Such a rally and close above a previous minor resistance level, seems to show that the unrelenting pressure the index has been under has diminished and that rallies are now possible and even probable.

On a daily closing basis, resistance is minor at 12393 and a bit stronger at 12480. Resistance is quite strong at 12549/12552, from two previous high closes as well as from the 20 and 100 day MA’s. The intra-week/intra-day chart shows decent resistance at 12476 level (20-week MA) and at 12518 (previous major low of consequence). Support will be decent at 12182-12210, minor at 12155, decent again at 12066-12077, and very strong at 11940.

The DOW traded over a 292 points range this past week and looking at the support and resistance levels in the chart, it is likely that a trading range between 12182/12210 to 12480/12518 will be seen this coming week.

Trading in this range will be just that, trading. as it will not likely give any clue as to what the indexes will be doing thereafter. It is still highly probable that the outside parameters of the sideways trading range I have mentioned often in the past, between 12743 and 11940, will both be seen, at some point over the next 2-3 weeks. For the next 2-3 weeks, the thing to expect from the DOW are short-term movements in both directions. The overall trend of the DOW is still cloudy and undecipherable.

Take a close look at 12192 and at 12369, this coming week. A break of either of those two levels will likely generate follow through in that direction. With the DOW having closed at 12307, and on the highs of the day, the 12369 level is likely to be the first to be tested. It is possible that for Monday, both of those levels will be seen and on Tuesday a break above or below will happen, thus generating further movement to the support/resistance levels mentioned above.

NASDAQ Friday Close at 2454

The weekly chart in the NASDAQ continues to show a bullish divergence over the DOW weekly chart and it is almost like looking a two completely different charts all together. Even though the NASDAQ closed lower this week than last week and the NASDAQ did just the opposite, the index was able to hold above the two previous weekly low closes at 2445 and also above the 100-week MA. The possibility of a bullish flag formation was kept alive with this action.

This past week, the NASDAQ did break and close below its daily closing support levels at 2441-2445 but with the close on Friday above 2445, that breakdown was negated. The index is now back into a bullish outlook with the trading parameters for the week clearly defined.

Resistance, on a daily closing basis, must now be considered quite strong at 2483-2489 as that is where there are two important previous daily high closes, a previous daily low close, as well as where the 20-day MA is located. On the weekly chart, resistance is strong at 2503-2515 and very strong at 2521/2523 where the previous weekly high close as well as the 50-week MA is located. Support, on a daily closing basis, is now strong again at 2440-2445, and very strong at 2390-2413. Major support, on a weekly closing basis continues to be at 2373.

The NASDAQ chart is looking more and more like the “key” to whatever the indexes will do for the few months. The weekly closing prices are being kept between the 50 and the 100 week MA but those averages continue to shrink into each other and it certainly seems likely that within the next 3-5 weeks, at most, that one of the other will be broken decisively.

One additional factor to consider is that the NASDAQ had a major intra-week low back in August 13th of last year at 2387. That low was made just prior to an 11-week rally that took the index up to a 7-year high at 2862. This week’s intra-week low was 2388 and with the weekly chart formation looking quite bullish, if the NASDAQ is able to close above 2521, on a weekly closing basis, a rally up to at least the 2707 level is likely to be seen. By the same token, if the weekly support level at 2445 is broken decisively then much of the bullishness of the chart formation will be gone.

I am probably jumping the gun by mentioning all these possibilities, as none of them are likely to happen over the next couple of weeks. Nonetheless, I do believe it is important to know what is at stake and how the NASDAQ seems to be playing, in the charts, an integral part of what the indexes may end up doing.

For this coming week, I expect the NASDAQ to trade between a low of 2430 and a high of 2485 and for nothing to be decided.

S&Poors 500 Friday close at 1360

The SPX ended up having an uneventful weekly close, as it was neither higher nor lower than last week. Nonetheless, a lot was accomplished during the week as the index traded all the way down near-to what a lot of analysts consider to be a level that is major support, between 1324 and 1331 (low of the week was 1331). On the weekly closing chart, though, nothing was accomplished as the index was able to maintain itself above the 20-week MA and no decision on the index’s future was determined.

The drop down to 1331 did fulfill the minimum drop needed to be considered a major re-test of support and if the index closes higher this coming Friday, it is possible that some upside momentum will be re-established. Like with the DOW there is still the possibility of one more drop down to the 1325 level, to come over the next 1-3 weeks. That drop, though, is not likely to happen this coming week.

Resistance is minor but evident at 1361, as that is where the 100-day MA is currently located. Above that level, there is no resistance of any consequence until 1383-1388 is reached. At that level the resistance is strong. Major resistance is at 1417-1428 where the 50 and 100 week MA’s are located. Support is minor at 1350 and then strong at 1331 and 1325. Major support at 1311.

With the close on Friday on the highs of the day and right at the 20 week and 100 day MA’s, it seems likely to assume the index will continue trading above those MA’s on Monday. If that happens, a rally up to 1384 will likely occur. It is of some importance that the SPX manage a higher close next week or else the downside will be tested strongly for the next few weeks to come.

The chart is not giving a clear sign of what is to come as most of the downside has been accomplished but the upside looks to be an uphill climb as well. Possible trading range for the week could be 1350 to 1384.

Most of the downside objectives have been reached and with so much bad news already out in the market, it is difficult to imagine what else could happen to generate further downside. Already it is being anticipated the Fed will raise interest rates at the next Fed Meeting, the consumer confidence numbers came out this past week at 25-year lows, and the financial companies were once again in trouble this past week. None of this information was able to generate a break of major support, even though the indexes were under strong pressure all week. It seems probable to think that at least until the Fed meeting next week, that the indexes are likely to show some strength. Even if the Fed does raise interest rates next week, it now seems likely that the recent lows will hold or only be broken by a small margin.

The probability of the stock indexes being in a sideways range continues to be strong but the possibility of a strong rally in a few weeks has increased.