DOW Friday closing price - 11284

The DOW generated a successful retest of the 200-week MA, currently at 10730, by closing higher than the previous week's close at 10817 on Friday. The index was also able to negate the break of the 100-week MA, currently at 11060 by closing above that line on Friday. Nonetheless, with the wide trading ranges seen over the past 3 weeks the 100-week MA does not have that much importance. On a negative note, though, the DOW was unable to close above the decent low close resistance at 11613 or even above the minor resistance at 11444, thus keeping the traders still leaning to the downside but waiting for the important economic reports due out next week before they commit to any direction.

In addition, the DOW had an inside week, which slightly favors the recent trend which is down, but does show that there is yet no clear definition among the traders as to what the next course of action will be. The index continued to have great volatility that under these circumstances favors the bears, though it must be said that Friday's rally came as a bit of a surprise as Fed Chairman Bernake did not commit to any additional stimulus and the initial reaction was negative. Nonetheless, within an hour of the drop the bulls were able to turn the index around and the day-traders jumped about and ended up generating a decent up-day and a close near the highs of the day and the week, suggesting that the first course of action next week will be up.

On a weekly closing basis, resistance is minor 11444, minor again at 11734, and minor to decent at 11858. On a daily closing basis, resistance is minor at 11320, minor to decent between 11444 and 11483, and decent at 11613. On a weekly closing basis, support is minor between 11092 and 11100 and decent at 10817. Below that level there is very minor support 10618 and 10653, minor again at 10150 and 10012, and minor once more at 9931.

It is interesting to note that the DOW sold off on Bernake's speak and got down intra-day on Friday to just 3 points above last week's close at 10817 (got down to 10820) but when the index failed to get below that level the traders bought the index knowing that a green close was likely to occur. Whatever level was accomplished thereafter, as far as a weekly close was concerned, was of little consequence as long as the index was not going to close below 10817 or above the 11613 level. That means that Friday's action was actually uneventful as the traders knowing this coming week has many important economic reports coming out were not going to commit to the downside until those reports come out.

Chart-wise, the DOW continues to look bearish and now with another week within the 10600 to 11500 trading range an inverted flag formation is being formed in the weekly chart with the flagpole being the drop from 12751 to 10603 (1948 points) and the flag being the trading range up to 11529 seen since (926 points). The flag, if the bottom at 10603 is broken, would give an objective of 9581. The flag is even more defined on the daily chart but it must be mentioned that the index could actually rally all the way up to around 11727 intra-week and still maintain the negative flag formation. As such, the index could easily continue to show strength at the beginning of this coming week, break above the 11529 level, and still have a major drop thereafter. It certainly makes trading difficult, risky, and requiring strong belief in the positions held.

It does need to be remembered that there have been huge trading ranges recently and that volatility has continued very high, which does favor the bears overall as upside movement, especially in an economy that is slowing down would tend to be slow, deliberate and certainly not aggressive. Simply stated, if this was not simply traders trading the range (support/resistance levels) and buying was being done for the "long-term" you would likely see small but consistent appreciation to the upside, not 400 point daily moves or 900 point weekly moves. The reality is that there are few good reasons to be an aggressive long-term buyer and many "potentially" good reasons to be an aggressive seller and when aggressive buying is being seen, it is likely just traders trading and not "investing".

To the upside this coming week there are 2 intra-week levels and 3 daily closing levels to watch for. Intra-week, the first level is Thursday's high at 11406. If broken, Friday's rally will get some additional fuel and traders will immediately try to get above the previous weeks high at 11529, which is the second intra-week level to watch. Getting above that level will open the door to the upside, at least on an intra-week basis, as no resistance is found intra-week until the 200-day MA, currently at 12000, is reached. On a daily closing basis, though, Wednesday close at 11320 will be the first (but minor) test of the bull's strength as it was the high daily close for the week. If broken, then the previous week's high at 11482 (which was also the high for the past 3 weeks) will be tested and if broken, then the major daily low close at 11613 would come into play. The first 2 daily closes are only important for the immediate term (1-week). The third close (above 11613) would mean a lot more for the long-term as talk about this only being a seasonal correction in the DOW would gain a lot of support.

To the downside, there are no levels close by that will act as chart catalysts for more downside until the low seen a week ago this past Friday at 11801 is reached. If the bears can push the DOW below 11801 then the year's low seen 2 weeks ago at 11603 will come into play with the bears trying to get below that level to generate some further strong movement down. With the index closing on Friday 483 points above the 11801 level, the bears will need the economic reports, or some catalyst from Europe, to push the index down to that level to being with. As such, the initial action for the week should be to the upside with the resistance levels playing a big technical part.

The levels mentioned will give the traders a better idea of how much strength, or lack thereof, the DOW has. The reports themselves will be important but the reality is that the reports are not likely to be good enough to generate any strong buying and the bulls will need to depend on momentum, smoke and mirrors (with help from Bernake) and the idea at least that in the mid to long-term things will get better. That means that technically they "have to" accomplish something on the charts because if they don't, the buyers won't get aboard enough to make a difference. Chart-wise, though, the bulls have a tough chore ahead of them and they will likely need some of the reports to come in "better than expected" as just meeting expectations likely won't be enough.

NASDAQ Friday closing price - 2479

The NASDAQ is also trading in a wide 200/220 point trading range between 2331 and 2531/2551 that also means nothing. Nonetheless, the index did close near the highs of the week and another test of the highs is likely to occur this coming week, especially since the index generated a positive reversal day on Friday (lower lows, higher highs and a close in the green and near the high of the day). Rallies up to the 2500/2510 level are likely to be seen and if there is enough momentum based on Friday's rally the index could get up as high as 2525/2531 before encountering any strong selling. In addition, the runaway gap that was generated 7 trading days ago will likely be closed on Monday if the index gets up to 2488. Having closed at 2479 on Friday, the probabilities are high the gap will be closed and that will take away one decent negative away from the bears.

On a negative note, though, the index is showing 3 intra-week lows in a row between 2331 and 2338 that is actually much more of a negative than a positive as triple bottoms rarely hold up. In addition, just like the DOW, the NASDAQ is also showing a negative inverted flag formation with the flagpole being the drop from 2862 to 2331 and the flag being the trading during the last 2 weeks up to 2555. A break below 2331 will generate an objective of 2224.

On a weekly closing basis, resistance is decent to strong at 2528/2530. On a daily closing basis, resistance is minor at 2482, decent to strong at 2555 and decent to strong again at 2616. On a weekly closing basis, support is minor to decent at 2341, very minor at 2326, minor at 2212, and minor to decent between 2141 and 2153. On a daily closing basis, very minor support is found at 2419 and 2381. Decent support is found at 2341, minor at 2326 and the minor to decent at 2292 and 2308. Below that, minor to decent support is found at 2265.

It should be mentioned that the triple bottom between 2331 and 2338 is not a true triple bottom as it was accomplished over a period of 3 weeks "in a row" and not with some spacing in between. On the daily chart, it is a double bottom with a drop down to 2331 one week and a drop down to 2337 the following week. In addition, Friday's low was 2385 and that will be considered a successful retest of the double bottom if the iNASDAQ gets above Friday's high at 2486 on Monday. As such, the index is likely to get some decent buying on Monday and if that occurs and the gap is closed, upside movement to 2510, 2531, or even up to 2555 could be seen.

The NASDAQ does have very decent weekly close resistance at 2530 but on a daily closing basis the strong resistance is the previous low daily close of consequence at 2616. As such, it is possible that intra-week the index could rally as high as that level and still close out the week on Friday without breaking the weekly close resistance at 2530. This opens up the possibility that the index could rally as much as an additional 150 points this coming week and still be in a negative mode.

Friday's low at 2385 is important as it now represents a likely successfulretest of the lows. In addition, since the index rallied over 100 points from that low, if the NASDAQ returns to that low any day this week it will be seen as a failure. On the other side of the coin, using the 60-minute chart and the 100 point rally from the lows on Friday, the index has built a bullish flag formation that if broken (a rally above Friday's high at 2486) will give a 2557 objective which would get right up to the strong resistance high seen 10-days ago.

The key for the first couple of days of the week will be closure of the gap at 2488. That will be what the traders will be keying on Monday. After Monday, and if the gap is closed, the NASDAQ will depend entirely on the important economic reports that come out at the end of the week.

SPX Friday closing price - 1176

The SPX has the same negative chart formation (inverted flag on the weekly chart) as seen in the other indexes and the same outlook as well. The index has the possibility of rallying up to the recent high at 1208 (even perhaps as high as the April high at 1217) and still have a bearish outlook overall. One negative the SPX still has over the other indexes is the fact that it continues to underperform them. Case in point is the fact it is the only index that still closed below the 100-week MA, currently at 1186, on Friday.

On a slight positive note, the SPX was able to negate the previous week's close "below" the 200-week MA, currently at 1152 and that has caused a small sigh of relief among the bears as a second close in a row below that line would have brought in strong selling this coming week. Nonetheless, like with the entire market, everything will be keyed onto this week's reports.

On a weekly closing basis, resistance is decent between 1208 at 1217. On a daily closing basis, resistance is minor at 1177 and decent at 1204. On a weekly closing basis, support is minor to decent at 1123, decent at 1066 and strong at 1022. On a daily closing basis, support is very minor at 1159 and decent between 1119 and 1121, and then nothing below until 1047 is reached.

The SPX does have another negative inasmuch as the index now shows a triple bottom on the daily closing chart between 1119 and 1122. Triple bottoms rarely hold up and therefore will continue to be a magnet to the traders as long as the bulls are not able to get the index to close above the 1225 level on the weekly closing chart.

The SPX will likely pivot this coming week around the 200-week MA which will be at 1151 next Friday. Should the index close below that line again next Friday, especially after all the economic reports are out, it will be close to impossible for the bulls to negate the break again. It should be noted that a daily close below the triple bottom at 1119/1122 will probably take the index down to and likely below the 1100 level on a daily closing basis. A close below 1096 would be a 20% correction from the highs and would suggest the economy is back into another recession, a double dip recession.

This coming week is what the traders have been waiting for to make a determination on what is the most probable state of the economy, back into a recession or simply a "temporary" slow-down before continuing the up-trend. The reports this week include the ISM index which came in lower than anticipated the last time around and just barely above the 50 level (came in last month at 50.9), which is the dividing line between shrinkage and growth. The number comes out on Thursday and is anticipated to come in at 47.00. If the report does come out as anticipated it could be the catalyst for the recession levels (20% drop from the highs) being triggered this week. Additional reports of consequence this week include the Chicago PMI, the 20-city Case-Shiller report, Personal Income and Spending, Auto Sales, Factory Orders, and the always very important Jobs report. After Friday's numbers come out there should be enough fundamental information for the traders to make a reasonable evaluation of what will happen during the last 4 months of the year, likely making this week into a "sink or swim" event week for the market.

It should be noted, though, that a week from Monday is Labor Day and many traders start taking the week off as early as Thursday or Friday leaving the trading of consequence to be done when they come back on Tuesday September 6th. In addition, Wednesday is the last day of August and hedge and mutual funds will likely attempt to keep the market up through that day trying to show some decent numbers for the month. With lower participation likely to be seen the last couple days of the week, the possibilities are good that those same hedge and mutual funds will not come in with any big numbers until after the holiday, leaving Thursday and Friday with some direction but not strong enough to cause big moves in the indexes.

Having generated an unexpected move up of some consequence on Friday, the probabilities suggest that follow through to the upside will be seen the first 3 days of the week, especially since Wednesday is the last day of the month and book squaring is likely to be seen. Nonetheless, it is also unlikely that any decisive move will be seen without the major reports due to come out on Thursday and Friday. As such, rallies are expected to be seen at the beginning of the week but resistances are likely to hold well.