Well, I was wrong — sort of. I was pretty sure that when we came close to the Dow 14,000 record set on July 19, we would most likely have a battle as the bears dug in their heels and held the line — at least for a while. WRONG!! Perhaps their pockets were already deeply depleted, but the bears just disappeared.

The bulls piled through the Dow 14,000 record like it wasn't even there! Not really sure what that portends, just yet. And while I am greatly impressed, there are a few dirty details that, to me, need some cleaning up before I wave the all-clear flag.

I will cover those details today, but first I want to make some comments about the breakthrough at Dow 14,000 and give you a look at my Super Chart Keyline with some analysis and predictions as to what I think might be coming up next. Seems I am a glutton for punishment, sometimes. Oh well. Here we go.

Let's start with a quick look back at my column of Sept. 20 (written on Sept. 17 with the Dow at 13,403) to see what I was thinking about the Dow 14,000 level that day:

"What does this mean for us? Simply, it means that we can very likely expect that while we may challenge the Dow 14,000 level, we may see the chart climb, pause and 'regroup,' as I call it. I expect that as we near the Dow 14,000 level, investors will go to the sidelines and wait to see what effect the Fed action will really have on the economy. I expect that it could easily take three-to-five weeks for big investors' minds to get the sense of coming events and begin to place their bets.

Sponsor

NewsMax Intelligent Options Service Hits Jackpot. Aussie Dollar Calls up 1,561% Since August! Sign up now for just $99 Trade options like the pros without having to give up your day job. Intelligent Options is a great way to get started. Even if you've never invested in options before, it's possible to start making 300% to 500% returns in just weeks. In fact, subscribers who got in on our Australian dollar calls back on August 22, 2007 have turned $10,000 into $161,000 in less than six weeks! Editor Jarret Wollstein makes it as simple as possible. His Intelligent Options bulletins aren't filled with a lot of technical gobbledygook. Just simple buy and sell recommendations in plain English. And when the time comes, we tell you precisely when to sell. His Aussie dollar calls were just one of seven options recommendations he made between Aug. 22 and early September that were up over 100% in just weeks. These include Canadian dollar calls, up 111% in five weeks . . . Wheat options, up 198% in 8 weeks . . . and BHP Billiton stock options, up 304% in five weeks. All these trades are 100% publicly-documented in our online Options Archives. Best of all you can try the service for just $99 if you accept this offer in the next 24 hours. You've got nothing to lose. We'll refund every penny if you're not completely satisfied with the service. Go Here Now.

But, once the yellow momentum line drops back down to the 50 area on the momentum gauge, I will begin to look for the next rally to start gathering strength and resume its march, with the highly determined goal of making NEW HIGHS."

As I said, I fully expected that we would encounter a lot of resistance at Dow 14,000. Why? My experience over the years told me that there was a reason that the last high was just that, "the last high."

There was a lot of big time selling right after Dow 14,000 occurred and, typically, a lot of sellers —mainly bears selling the market short — make major investments to see that previous highs offer lots of resistance to anyone challenging them.

[Editor's Note:Free Report: The 5 Five Best ETFs You Can Buy Today.]

Seldom can I recall a time when the first challenge of a previous high was breached within a period of days. Usually, there was a battle of at least several weeks before the bears grudgingly backed off, if they did at all.

However, this first encounter with the Dow 14,000 previous high was not met with the expected huge vanguard of bears. In fact, no resistance to the level seemed to be there at all. It just never materialized. Why? Honestly, I just don't know. Maybe the fear of the subprime problem (ancient history now, but just breaking then) never really allowed for the bears to set up a strong line of defense.

The retreat from Dow 14,000 seemed to be just a lot of panic selling and no vanguard line of bears ever really developed. But, for whatever reason, the Dow 14,000 previous high just evaporated and the new high close of Dow 14,087 was a huge surprise to the market! Wow!!!

To better illustrate all this, I have included in this column two of my Super Charts, the Dow Daily Super Chart and the S&P Weekly Super Chart.

First, note the Dow chart. When I wrote my Sept. 20 column (on Sept. 17), we were about at the Dow 13,403 level. That was just a bit above what is now the Second Major Support line, as you can see. I had also drawn a horizontal line at the Dow 13,671 area and suggested that this might present some initial resistance for the battle to reach Dow 14,000.

However, you can see by the lower "horizontal" circle, on Sept. 19, the day before the distribution of my column, we had already popped through that Dow 13,671 "barrier." And then, we just stalled there for about 6 days.

Finally, we began the assault on Dow 14,000 on Sept. 26. As I had said in the Sept. 20 column, I felt it was likely only to be the first skirmish. Wrong! We just piled through it — see the upper circle — in two days.

Of course, this changes everything. From here we must talk about fresh resistance and support levels.

So, here is what I see developing.

Take a look at the lower chart on the Dow Super Chart, called the "momentum indicator" section. This momentum indicator is currently (Oct. 3) reading 84.59. This is a very high reading and most often needs to come down a bit before the price of the Dow can resume a solid advance.

My opinion is that we need to see it at least drop to the low 70 area to see the current advance consolidate and gather real steam. That may mean we could drop back in price to the last support near that lower "horizontal" circle at the Dow 13,730-13,830 area.

It is even possible to see a drop to the Dow 13,630-13,670 area, the new First Major Support level. (The current Second Support level was the old First Support Level as I wrote the Sept. 20 column and is now the Second Support level).

There are two kinds of price adjustments that occur while the "momentum indicator" corrects to a lower level. One is called a "price" adjustment where the price of the Dow does fall and tests the supports I outlined.

The second is called a "correction in time." In this instance, the current price level holds its present area (give or take 50 -70 points or so) and the "momentum indicator" falls while the Dow price holds steady. This second type of adjustment occurs about 30 percent of the time.

Will the "correction in time" be the type of adjustment we get? Just can't tell you yet. Only time will tell that. We will just have to watch. But, at least for now, you know what you might expect from the Dow activity over the near term.

But, I said earlier that there was a bit of "dirty details" to attend to with the charts today. I want to address those details now.

The problem I see for the moment is that while the Dow is plowing ahead to new highs, its companion index, the S&P 500 cash index, has stalled BELOW its last old high of 1,553 (see yellow circle near upper right corner of the chart).

At the moment, the cash (not the December futures) stands at 1,539. That is 13 points BELOW the old cash high and the closest it has come to challenge the old S&P cash high was to stop at 6 points below it at 1,547 on Oct. 2.

Why? Well, I have learned over the years that it is often the 30 Dow stocks that get attention before the much broader S&P 500 stocks. This is partly due to (1) the sheer huge size of the Dow stocks volume and the obvious liquidity that provides investors and (2) partly due to investors just being a bit slow sometimes to really commit to a full-fledged rally (see last week's article for more on this).

[Editor's Note:Special: Sir John Templeton Was Right. Get His Latest Insight on Housing and Markets.]

Whatever the reason, I need to see that old high on the S&P cash breached before I am fully comfortable here. Again, I emphasize that this is the CASH index you need to watch, NOT the December futures. The December futures closed yesterday at 1550 but have closed as high as 1558 on Oct. 2, last Monday, just 4 points below its July 19 high of 1562.

So, the news, while it is very good, is not a complete happy face. We will need to be aware of this short fall by the S&P and exercise some caution for the near term, I would guess several weeks at least — but then again I said it might take several months to break Dow 14,000. So, what do I know? This I do know: We are in for a huge long-term ride to the Dow 19,000-20,000 area in the next 35-45 months. So, don't get left out!!!

And as usual, I will report to you each week any crucial developments on the Super Chart and its Keyline. So, you can count on being up to date as the rally progresses — and, oh yes, in case it doesn't progress (only a 1.5 on my 1-10 scale, 10 being absolutely sure).

So, that brings you up to date on the charts for now. Do hope your coming week of investing is a good one. In the meantime, you keep in touch. I do! See you next week.

Editor's note:
Special: Where Are Oil Prices Headed? Click Here.
Special: Sir John Templeton Was Right. Get His Latest Insight on Housing and Markets.
Free Report: The 5 Five Best ETFs You Can Buy Today.