DOW Friday closing price - 11577

The DOW had a very uneventful week trading with extremely low volume and little direction. The index did make a new 30-month intra-week and weekly closing high, but it was minimally done and without conviction as the traders evidently sat on the sidelines awaiting the beginning of the New Year before making any decisions as to what will happen in 2011. No clearly defined chart action was seen making last week a "throw-away" week.

Nonetheless, it should be mentioned that all economic reports this past week were better than expected and yet the DOW was unable to generate a rally of consequence. Though it is difficult to evaluate that kind of action, due to the fact that it was unlikely traders would put on new positions at the end of the year, it is probable that the action seen as the beginning of next week will reflect those feelings, either with an eventful rally or with a drop stating that the index is sated to capacity.

On a weekly closing basis, resistance is decent at 11578 and strong at 11723/11734. On a daily closing basis, resistance minor at 11603, minor to decent at 11640, and decent to strong between 10715 and 10734. On a weekly closing basis, support is very minor at 11221, decent between 11098 and 11101, and decent at the 200-week MA, currently at 10930. On a daily closing basis, support is very minor at 11555, and again at 11478. Below that level, support is minor between 11362 and 11372, minor at 11114, and minor again at 11036. Strong support is found between 10979 and 11008.

The DOW closed slightly above last week's close but still under the weekly close resistance from May06 at 11578. No topping-out signal was given, but no clearly defined signal that the trend is continuing was given either. The index did make a new intra-week high at 11625 which does put the index near the May06 high at 11670 as well as within shouting distance of the "major" Jan00 high at 11750. The Jan00 high stood up for 6 years before it was broken and it was the culmination high from a rally that started Sep08 at 7400.

The DOW has clearly shown an inability over the past 3 weeks to rally indicatively in spite of the continued positive economic reports and lack of "immediate" resistance. It is not yet known if this is a symptom of general profit taking seen in December or the precursor of things to come in 2011. Nonetheless, this is likely to be defined clearly the first or second week of January as there are several important economic reports due out the first week and the earnings report quarter gets started the second week.

It should be mentioned that 2011 is likely to be a very difficult year for the indexes as the financial problems that started the collapse in 2008 have not gone away. In fact, there is mounting evidence that in 2011 many states will face bankruptcy and as many as 100 municipalities will face bond defaults. It should also be mentioned that the dollar continues to weaken, due to the consistent printing of money by the Fed to pay its bills, making the currency less valuable. In addition, there are now serious talks among the major nations of the world to get away from the US dollar as the main world currency. If this were to happen, and the possibilities of it happening have now strongly increased, the dollar would take a strong downturn making everything much more expensive and causing the stock market to dive, into what could be a double dip recession. These are but a few of the concerns that traders will have to face in the New Year.

As far as support is concerned, the 11500/11518 level has taken on some meaning inasmuch as the index shows 5 daily highs and 1 daily low in that area over the past 2 weeks. A break of that level will weaken the chart, and if the DOW starts trading below the previous high at 11451, selling will increase. With no support of consequence having been built on the way up, other than at 10.000, if 11451 would be taken out the index would likely drop down to that level without much problem.

It is clearly evident that the first 2 weeks of January will be extremely important. Nonetheless, it should be mentioned that based on the probable problems facing the U.S, this coming year, the index would need some impressive numbers on the economic reports coming out to break above the 11750 level.

NASDAQ Friday closing price - 2652

The NASDAQ was the only index that generated a red close on Friday, closing 12 points below last week's close. This event could be significant inasmuch as the index has been the leader to the upside the past few weeks and weakness was not expected to be shown at this time, especially since the index had no previous resistance of consequence at last week's high of 2675. Nonetheless, the index did not participate in the minor rally seen in the other indexes and ended up having an inside week. Such an event might be considered an omen, though possibly minor in nature due to the lack of participation in the market the last week of December.

The red close in the NASDAQ was the first in the last 7 weeks and even though it was not by enough of an amount to make it significant or indicative, it could be an omen that the indexes are heading lower if the index generates another red close next Friday. Simply stated, the index needs to rally this week as more of the same non-event action, as seen the last 3 weeks, would be a negative signal in and of itself.

On a weekly closing basis, resistance is decent to strong between 2692 and 2706. Above that level, major resistance is found at 2810. On a daily closing basis, decent to strong resistance is found between 2719 and 2724. Above that level, there is no resistance whatsoever until the 2800 level is reached. On a weekly closing basis, support is minor at 2518. Below that, there is minor support at 2445, very minor at 2373, and decent to strong between 2212 and 2239. On a daily closing basis, support is now minor at 2617, minor to decent at 2495 and decent to strong between 2460 and 2468. Below that, there is minor support at 2437 and then decent at 2400.

The NASDAQ should not have stopped rallying this week, especially since the economic reports were all positive. Nonetheless, even on the daily chart, the index was unable to generate a higher close than was seen a week ago Wednesday at 2671. In fact, 4 out of the last 6 daily closes were red and the 2 that weren't were only green by 1 point and all below 1267. As such, it can be said that the index basically showed weakness all week long, though not substantially.

Like the other indexes, NASDAQ has not been able to build any kind of support of consequence nearby (closest is at 2500), which basically means that if selling is seen at the beginning of the year a 150+ point drop could be seen at the blink of an eye. The index did make a minor low this past week at 2645 and it also shows some very minor supports at 2635, 2617, and 2609. Nonetheless, ff the 2645 low is taken out, a domino effect could begin that would take the index down to 2500 within a week or two.

To the upside, the 2675 level now has to be considered resistance, though somewhat minor in nature, inasmuch as no previous resistance is found at that price. If that level is broken, a rally up to at least 2698/2700 is likely to be seen.

SPX Friday closing price - 1257

The SPX had a very uneventful week closing at the same level as last week's close even though a new 30-month intra-week high at 1263 was made on Wednesday. No follow through to that high was seen, in fact the index may have negated the mini breakout with a close on Thursday and Friday below the previous high daily close at 1259.

The SPX does not show much resistance of consequence until 1300 is reached, but there is some minor resistance at 1268 that was not even reached in spite of all the good economic news that was released this past week. The inability to reach even a minor resistance level suggests that the index is having problems going higher.

On a weekly closing basis, resistance is minor at 1265 and then decent to strong between 1292 and 1298. On a daily closing basis, resistance is minor at 1268. Above that level, resistance is decent to perhaps strong up between 1300 and 1305. On a weekly closing basis, support is minor at the 200-week MA, currently at 1190. Below that level there is no support until the 50-week MA is reached, currently at 1121. On a daily closing basis, support is minor at 1235, very minor at 1223 and decent to perhaps strong between 1178 and 1184. Below that, there is no support until minor support is reached at 1137 and again at 1125.

It seems that the SPX is using the 1257 level, on a daily closing basis, as a short-term pivot point as it has closed there, or within 1 point, on 4 of the last 6 trading days and therefore the close on Monday could be indicative and based mainly on whether it closes red or green. The index did show an intra-week low this past week at 1251 and if broken, further selling would likely be seen with 1235 as the nearest minor support below. Nonetheless, it should be mentioned that on the weekly chart, if 1251 is broken (last week's low) there is no support of consequence until 1200 is reached. As such, any break below 1251 could generate an additional drop of 50 points without much of a problem.

To the upside, the 1268 level must still be considered resistance, though minor, and if last week's high at 1263 is broken, that would be the likely objective. Above 1268, though, not much resistance is found until 1300 is reached.

This coming week starts off with the always important ISM Index report on Monday at 10:00am. It is anticipated to come in higher at 57.3%, above last months 56.6. It must be mentioned, though, that since 1994 the report has shown a major high at 61 and pretty good resistance throughout the years at 57, which likely means that even if the report comes in better than anticipated, the traders are not likely to expect much higher numbers the following month. As seen this past week, the better-than-expected reports are not having the kind of positive effect that could signal further upside and therefore it is possible that the market is now sated with good news and beginning to anticipate a downdraft in the future.

It should also be mentioned that the indexes are all facing very strong and important resistance levels nearby that will need major positive news in order for the traders to feel confident they can be broken. Such positive news is unlikely to be seen as many of the economic reports are already at 15 year highs, and much more than that is unlikely to be seen at this time. As such, the probabilities do not favor the big hedge and mutual funds starting the year buying aggressively as the profit potential has to be considered extremely limited and yet the risk factors extremely high, especially when considering the severe economic obstacles that are likely to be faced by the U.S. this coming year.

Though this past week the big traders were evidently on the sidelines and not trading, it was still quite evident that positive news is no longer bringing in the kind of buying that would normally be seen under those circumstances. It is difficult to give much credence to this negative omen because so few traders were even around. Nonetheless if the lack of buying continues to be seen this coming week, especially if the ISM Index report is positive, it will likely scare the big traders away from the long side of the market, not only for the week but perhaps for the first quarter of the year, or even longer.