DOW Friday closing price - 11674

The DOW continued to receive good economic news and was able to extend its rally making a new 30-month intra-week and weekly closing high with a rally up to 11742 and a weekly close at 11674. The week started with a positive ISM report on Monday that generated a spike-up rally above the 11700 (rallied up to 11711) and was followed up on Wednesday with a much better than expected ADP jobs reports that had the index getting up very near to the major resistance level from the year 2000, as well as from a minor resistance seen in 2008, at 11750.

Nonetheless, on Friday the Jobs report failed to confirm the bullishness of the ADP report and selling came in causing the index to erase most of the spike-up rally seen on Monday, thus increasing the probabilities that the 11742 high seen during the week will prove to be a top to this rally.

On a weekly closing basis, resistance is strong at 11723/11734. On a daily closing basis, resistance is 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 11555/11565, 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 was able to manage a daily close up at the very strong daily close resistance level between 11715 and 11734 with a close on Wednesday at 11723, followed with 2 daily closes in a row below that level, suggesting that the resistance there has held. No "top-found" signal was given as a daily close below 11655 would be needed to generate such a signal. Nonetheless, the less-than-expected Jobs report that came out on Friday that caused the index to spike down during the day suggests that further upside will be very difficult to accomplish, not only from a chart-basis but from a fundamental basis as well.

During the past 5 weeks, after the initial spike-up seen the last week of November from 10929 to 11388, the DOW has been able to "squeeze-out" slightly higher highs and higher lows each week. Nonetheless, each new high has been limited and more importantly no support whatsoever has been built on the week chart during the rally the last 6 weeks, likely meaning that the slightest pause in the rally, as well as a drop below a previous week's low, would immediately cause a drop back down to at least the 11388, if not a retest of the 11,000 once again. Last week's low was 11577, so that level will be of great importance this coming week, especially since the index saw a drop down to 11599 on Friday, suggesting that if no strong positive news is seen this coming week, that the probabilities of that level getting broken are high. No economic reports of consequence are due out until Thursday, making this coming week more technical than news oriented.

To the downside, the DOW shows very minor support at the 20-day MA, currently at 11550, and then minor to decent support at the 11500 level where a couple of previous lows as well as an array of previous highs is found. Below that, there is some minor support at the previous high at 11451 and then nothing until the 50-day MA, currently at 11360, is reached. The key for the week will be last week's low at 11577. A break below that level will bring in new selling as well as a fair amount of profit taking.

To the upside, and looking at the intra-day 60-minute chart, resistance should be decent between 11705 and 11711. In fact, if that level is broken the possibilities of the index making a new high above 11742 (possibly up to 11750) would be high. As such, the trading range the traders will be looking at on Monday is 11577 to the downside and 11711 to the upside.

The DOW rallied Friday afternoon, likely because the traders are accustomed to dips being bought and did not feel comfortable going over the weekend short. By the same token, with no news due out on Monday, it is likely the indexes will come in lower, or at best unchanged and head lower from there. I expect to see a down week with 10500 as the main objective for the week. Likely trading range is 11674 to 11500.

NASDAQ Friday closing price - 2703

The NASDAQ also made a new 36-month intra-week and weekly closing high, closing up very close to the decent to strong resistance level from June and November 2007 at 2707 and 2706 respectively. The index has also shown 7 weeks in a row of higher highs and higher lows than the previous week and during this period of time has not built any support of consequence on the weekly chart, until the 2500 level is reached.

The NASDAQ is only 4% away from the 10-year high weekly close at 2810 that was made in 2007, but is now facing a resistance level from the peak of the previous bull market that is going to be very difficult to overcome, especially since the closest support level is 200 points away. Facing strong resistance and without support close-by that can be counted on does not make a scenario where new buying is likely to be seen.

On a weekly closing basis, resistance is decent to strong between 2706 and 27.07. 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 has strong "intra-week" resistance between 2724 and 2735. Having reached 2715 and having closed only 3 points below the strong resistance level at 2706, suggests that further upside is very limited and perhaps unattainable. Nonetheless, on the daily closing chart the index still has a bit of room to rally as the high daily close in 2007 was 2724 (21 points higher than Friday's close.

To the downside, the NASDAQ shows a low this past week at 2663 and if broken, as well as the previous week's low at 2649, would likely initially thrust the index immediately down to 2592 which was the previous high seen the first week of November. Nonetheless, as far as previous low support is concerned, if the 2649 minor support level breaks, there is nothing until the 2500 level is reached. As such, a break below last week's low at 2663 could start a domino effect that would take the index down 200 points (8%) in a very short period of time.

Once again, like the DOW, the NASDAQ has strong resistance right above and little support beneath, which makes for a dangerous situation for the bulls if they are not able to stretch the rally upward.

SPX Friday closing price - 1271

The SPX also extended its rally closing higher than last week. Nonetheless, the index has not yet reached a previous resistance level of consequence where selling can be expected and therefore it can be said the index is lagging, rather than leading, the other indexes. As it is, the fact the index has no strong resistance above but has not been able to "lead the pack" suggests the innate weakness of the financial industry continues to weigh on the market.

With Monday's spike-up type rally, the SPX got up to 1276 and near a "minor" previous intra-week resistance at 1277. The index was only able to generate an additional 2 points higher throughout the week, up to 1278, suggesting that the "minor" resistance was able to hold the index from going higher. That, in an of itself, has to be considered a negative to further rallies.

On a weekly closing basis, resistance is decent to strong between 1292 and 1298. On a daily closing basis, 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.

Like the rest of the indexes, if the SPX breaks below last weeks low at 1257 a signal that a top has likely been found will be given. It is also important to note that at 1257 the index also shows a minor to decent daily close support level, which if broken would also give a minor sell signal, likely thrusting the stock down to the previous high, as well as the 50-day MA, both currently at 1227.

The late rally on Friday to close 11 points above the low of the day was likely short-covering by the day-traders not wanting to go home short over the weekend. Nonetheless, if there is no positive news over the weekend in Asia or Europe, the probabilities favor the index opening unchanged to lower and immediately testing Friday's lows, putting the index only a few points above the important level for the week at 1257. Such action would be seen in a negative light and would likely cause a break of the support level early in the week, putting the index in the red for most of the week.

Any daily close above 1276 or an intra-week rally above 1278, will likely bring in new buying and a run to the 1300 level where the resistance is stronger. Probabilities, now favor the downside with a trading range possibility of 1271 to 1250.

There are many reasons to believe that a top was generated this past week, both chart-wise and fundamentally. Chart-wise, both the DOW and the NASDAQ reached levels of strong resistance that are not likely to be broken without fundamental help. Fundamentally, the Jobs report suggests that the economy is continuing to improve but at a very slow pace, and likely slower than what the traders anticipated it to be, causing the rally over the past 4 weeks to be overdone. In addition, the ISM report was not higher than expected and at levels that during the past 16 years has been strong resistance 3 times, suggesting that it, too, is likely to come in lower next month.

The weakness seen on Friday was a negative sign and with no economic reports of great importance that could support new buying until next Friday, the lack of support near-by, the overbought condition, as well as the negative risk/reward ratio the bulls are facing right now, are likely to cause selling to appear.

Next Friday, though, there are a slew of reports due out that could be catalysts, starting with PPI, CPI, the ever important Retail Sales number, Industrial Production, Capacity Utilization, Business Inventories, and Michigan Sentiment. The most important report is Retail sales and it was reported this past week in the news that December sales were worse than expected, likely meaning the Retail Sales report will not be positive. With most reports due out already at high numbers and the Retail Sales number likely to be a disappointment, it is unlikely that buying will be seen during the week in "anticipation" of those reports, thus putting additional pressure on the indexes.