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Market Facing Key Resistance Levels

8:50am (EST)

The bears were on the verge of breaking support last week as the momentum was clearly on their side. All three major indexes started the week under pressure with the S&P 500 dipping below the 1,300 level after a downgrade of U.S. debt. The Dow was on the verge of falling below 12,000 and the Nasdaq, which had been leading the decline over the past few weeks, was folding like a cheap lawn chair.

Tuesday was a flat day to start but the bulls did recoup over half of the losses they gave back on Monday as they looked towards some solid earnings after the close. And they got it. Yahoo (YHOO, $16.85, down $0.02), Intel (INTC, $21.46, up $0.05), Juniper Networks (JNPR, $40.08, up $0.82) and Wynn Resorts (WYNN, $147.71, down $0.21) all beat estimates after Tuesday's close.

Apple (AAPL, $350.70, up $8.29) followed that group after Wednesday’s close and just flat out crushed Wall Street’s estimates. We were watching Apple all last week and profiled a WEEKLY option trade that did phenomenal. Apple traded to a low of $320.16 on Monday when the market was tanking and we were looking for clues of a break below $320 for a sell-off. It never came as shares added $30 for the week.

The positive earnings surprises from Tech was too much for the bears to overcome as the bulls were able to push the major indexes towards their February highs and right at major resistance levels.

The Dow added 52 points, or 0.4%, and went out at its 52-week highs on Thursday.  The index hit a low of 12,093 on Monday which was right between our 12,200-12,000 downside targets which had us thinking the bears could be on the brink of a full-fledged attack.  However, the rebound on Wednesday was powerful and once again turned the tables in favor of the bulls for a possible breakout.  For the week, the Dow gained 164 points, or 1.3%, and Thursday's advance managed to get the blue-chips to our 12,500 target with fluff up to 12,600.  A break above here gets 13,000 into play.

The S&P 500 gained 7 points, or 0.5%, to settle at 1,337 and easily closed above the 1,325 and 1,334 targets we mentioned all last week.  The index flirted with disaster on Monday when it touched a low of 1,294 but closed above 1,300.  Tuesday was bullish ahead of Wednesday's bounce but once the 1,325 level was cleared, this area became important because it represented a double off the March 2009 lows.  For the week, the index jumped 18 points, or 1.3%.  Our upside target has been 1,350 so we aren't convinced (yet) that new highs are in store until this level is taken out.  If it is, look for a quick run to 1,375 with a possible run up to 1,400.

The Nasdaq advanced 17 points, or 6%, to finish at 2,820 after reaching a low of 2,706 last Monday intraday.  We were watching for a break below 2,700 which was our downside target and Tuesday's pop put the index just under our 2,750-2,800 targets.  However, Wednesday's gains powered Tech past 2,800 for the first time since mid-February as the index finished above this level for the second-straight session.  For the week, the Nasdaq was up 56 points, or 2.1%.  A break above 2,850 could force the shorts to cover up to 3,000.

In mid-February here were our thoughts on the markets and our upside targets:

“We said last Friday that “1,325 Changes Everything” and only confirmed our target of 1,350 was in the cards. The index battled 1,334 for 3 sessions before breaking through yesterday after gaining 8 points to close at 1,336. Back in mid-January we said if the bulls could get past 1,300 then we could see 1,450-1,500 in 2011. However, let’s get to 1,350 first.

The Dow actually traded into our target zone of 12,300-12,350 after kissing 12,303 but finished the day at 12,288, up 61 points. If the upper-end of our zone is taken out then the bulls will be gunning for 12,500-12,600 over the near-term with a run to 13,000 coming if the momentum can last until April.

As for the Nasdaq, the index finished at 2,825, up 21 points, and closed right in the middle of our 2,800-2,850 targets. Of course, we have been mentioning a run to 3,000 since the beginning of the year and a break above here gets the bulls there.” (NYSE:END)

Naturally, our time frame was a little off due to the geopolitical concerns that have plagued the market over the past few months which has lead to higher oil prices. The natural disaster in Japan also threw us off but we said back in October the rally would last until April.

With one week to go for the month, it’s possible the bulls continue their run higher but if they struggle with Nasdaq 2,850 and S&P 1,350 then we could be headed back to the bottom into the current trading range.