DOW Friday closing price - 12479

The DOW, with the red weekly close on Friday, made last week's close at 12657 into a successful retest of the 12810 38-month weekly closing high seen the last week in April. The successful retest has increased the possibility that a major top is now in place as this rally has now given the first failure-to-continue-the-trend signal. The failure signal still needs to be confirmed with another red close next week and with so many possible fundamental catalysts on the horizon the traders are not likely to respect the technicals at this time. Nonetheless, it is one more added pressure that will be felt by the bulls, who now "need" help to continue the uptrend.

One additional negative is that the DOW has also built 90% of what could end up being a Head & Shoulders formation on the weekly closing chart with the left shoulder being the close seen the second week of February at 12391, the head being the 12810 high seen the last week in April, and the right shoulder being the previous week's close at 12657. The necklines are the low weekly closes seen the second week of March at 11858 and the recent low weekly close seen the third week of June at 11934. If the 11934 level is broken, on a weekly closing basis, the objective of the H&S formation would be 11060. With technicals now starting to turn potentially bearish the momentum is beginning to shift downwards.

On a weekly closing basis, resistance is minor at 12657, minor again at 12743/12769 and strong at 12810. On a daily closing basis, resistance is minor at 12567, and minor again at 12605. Above that level, resistance is decent between 12719 and 12760. Decent to strong resistance is found at 12810. On a weekly closing basis, support is minor at 12380 and decent at 11934. Below that level there is minor to decent support at 11858 and then nothing until minor to decent support is found at 11092/11100. On a daily closing basis, support is very minor at 12437 and decent at 12356, minor to decent at 12201, and minor again at 12058. Decent to strong support will be found between 11897 and 11937.

Though formation of the Head & Shoulders is a possibility it is not yet a strong possibility as further downside of some consequence will need to be seen this week. Intra-week drops down to the 12000 level as well as a close below the 20-week MA at 12350 next Friday are all necessary in order for the formation to gain strength. Nonetheless, there are certainly enough important earnings reports due out this week, as well as potential for worldwide negative events that the possibility is viable.

The 12350 level will likely be considered a pivot point intra-week as that line has been important in the past. If the index starts trading below the line, especially if it happens after Wednesday morning when some of the most important earnings reports for the week are out, it will likely be indicative that further downside will occur. It should also be noted that at 12340 the 50-day MA is currently located, and at 12315, the 100-day MA is located, making that whole area the big clue technically for the week.

The weekly chart on the DOW continues to "lean" toward the upside even though some small negative signals were given this past week. The DOW did run up 791 points in just 4 weeks with 80% of that run happening 2 weeks ago and the fact that the index had 1 red week does not necessarily mean that the run is over. Having had a red week this past week, as well as a close in the lower half of the trading range, suggests that follow through to the downside will be seen. Nonetheless, if the low for last week at 12406 is not broken and the high for last week at 12655 is broken, the bulls will jump back aboard and likely push the index above the high seen 2 weeks ago at 12753, which would in turn negate the possibility of the H&S formation and likely give the bulls enough strength to take out the 38-month high at 12875 and get up to the 13000 level.

With the debt ceiling debate still being a major negative and not likely to be resolved over the weekend, the probabilities favor the DOW heading lower this coming week with 12350 as the first and perhaps main objective. The earnings reports on Tuesday morning and Tuesday afternoon will then likely help the traders make some decisions as to what direction to take for the rest of the week. Nonetheless, until some accord is made on the debt ceiling, all potential rallies based on good earnings will find strong selling as that issue is now the most important thing on the table.

If this coming week was a normal week without the earnings reports or the debt ceiling issue, chart-wise the DOW would likely have a 12310/12350 to 12600/12605 trading range, with the 20-week, 50 and 100 day MA's being the key issues for the traders. Nonetheless, the technicals are not likely to be all that important this week, making this week a flip of a coin.

NASDAQ Friday closing price - 2789

The NASDAQ generated a red close on Friday on the weekly chart putting the rally and leadership to the upside in question. The index was unable to get any follow through to the previous week's strong close near the 10-year high in spite of NFLX and APPL making new all-time highs, GOOG generating a very strong rally with a much better than expected earnings report, and AMZN holding on to its recent gains. The red close was unexpected and may end up being a major double top on the intra-week and weekly closing charts if the index ends up with another red close next Friday.

On a positive note, though, the NASDAQ did test the 20-week MA, as well as the 50 and 100 day MA's during the week and was able to close above them on Friday, leaving the door open for the weakness seen this past week being only a 1-week anomaly.

On a weekly closing basis, resistance is strong at 2873. Above that level, resistance is not found until the psychological 3000 level is reached. On a daily closing basis, resistance is very minor at 2796 and again at 2823, decent at 2833/2835 and strong at 2873/2876. On a weekly closing basis, support is minor at 2764, at 2689 and at 2643. Decent to strong support is now at 2616. On a daily closing basis, there is minor to decent support at 2762, minor at 2746 and minor to decent at 2722. Below that level, there is 2686 and strong support at 2616.

The NASDAQ opened the week lower and was unable to generate any kind of meaningful rally throughout the week, closing in the lower half of the week's trading range suggesting further downside will be seen. Nonetheless, the index was also unable to follow through on Thursday's weak close at the 50 and 100 day MA, both currently at 2760, generating an inside day on Friday but always in the green, suggesting the traders got on the sidelines awaiting whatever news would be generated over the weekend.

The inside day on Friday suggests the probabilities favor follow through to the downside on Monday, but the ability of the NASDAQ to hold above the MA's on Thursday has to be considered a positive, at least from a technical basis. To the upside the 2833/2835 level, on an intra-week and on a daily closing basis as well, is decent resistance. To the downside, Thursday's close at 2762 is support. Trading within that 73 point trading range means little. Pivot point for the week will be the 2800 level.

Like with all the indexes, the NASDAQ will depend much on what happens with the debt ceiling debate but does have 2 earnings reports this coming week that are very important as GS and AAPL, both NASDAQ stocks, will report Tuesday morning and afternoon, respectively. GS is presently under selling pressure due to negative fundamentals but AAPL is at the previous all-time highs and if the earnings report is positive, new all-time highs would be made, likely bringing in more buying.

SPX Friday closing price - 1343

The SPX continued to be the weak sister this past week as it was the only index that broke below the 50 and 100-day MA and down to the 20-day MA, currently at Friday's low of 1307. In addition, the index closed slightly below the 20-week MA, currently at 1317, with Friday's close at 1316. The index remains the "whipping boy" of the market due to the economic problems being seen in Greece, Italy, and a couple of other countries in Europe.

Like the DOW, the SPX also now shows a successful retest of the recent 38-month high weekly close at 1363 with the previous week's close at 1343, which is also significant inasmuch as the 1343 level has been a strong resistance level since the second week of February. In addition, the index also shows a possible Head & Shoulders formation with the recent low at 1258 being the important neckline that if broken, would generate a downside objective of 1150.

On a weekly closing basis, resistance is decent to possibly strong at 1343 and decent to strong at 1363. On a daily closing basis, resistance is minor at 1335, decent at 1343/1345, decent again at 1356 and strong at 1363. On a weekly closing basis, support is minor at 1319, minor again at 1279 and decent at 1268. On a daily closing basis, support is minor to decent between 1305 and 1308, decent at 11265, and decent to strong at 1256.

The SPX closed above the also decent daily close resistance at 1343 on Thursday but failed to generate the kind of follow through to the upside expected and stopped at the next resistance at 1357, which was minor resistance at the time, and was not even able to test the strong resistance at 1363. The index almost gave a minor failure signal on Friday when it traded below 1343 most of the day but at the end of the day was able to rally to close at that level, leaving the door open chart-wise for either follow through to the upside or a failure signal, based on what the earnings reports show.

From a purely technical basis, and for a short-term outlook, the SPX closed at a pivot point on Friday that would tilt on either direction based on a red or green close on Monday. The 1305/1308 level, on a daily closing basis, is important short-term support and if broken would likely thrust the index down to at least 1275. By the same token, if the index can get above Friday's high at 1317 there is little in the way of resistance until the 1340/1345 level is reached. Having closed near the day's high on Friday, suggests the probabilities favor the upside.

This coming week the large bulk of financial reports are due out with GS, BAC and WFC all reporting Tuesday morning before the market opens. Last week both financial earnings reports that came out (JPM and C) came out better than expected but as has been the case over the past 2-3 quarters the better than expected earnings reports did not generate any rally of consequence. If that trend continues, the earnings reports may not have much of an impact, basically due to the worries that are hanging over the market regarding the economic woes being seen in Europe.

The SPX will likely be driven by news this coming week and not by charts or technicals and with the strong earnings reports due out on Tuesday morning, it is likely that the index will tread water on Monday. Nonetheless, like with the rest of the indexes and the market, much will depend on what happens with the debt ceiling debacle.

The debt ceiling debate is now taking center stage, up and above the earnings reports which were previously supposed to be the catalysts for the direction to be taken the next few months. The debt ceiling debate is likely to get down to the last minute before being decided and that is August 2nd, making the next 2 weeks very unstable. There are viable concerns about whether a compromise will be reached and the traders will likely lean on the conservative side inasmuch as a failure to compromise would result in a strong to major downward reaction. As such, the indexes are likely to see choppy trading with a slight downward bias, no matter how the earnings reports come out. By the same token, if the earnings reports start coming out negative, the traders are more likely to short the market than simply get on the sidelines, making the trading over the next 2 weeks difficult for the bulls.

Technically speaking, the indexes are at a short-term pivot point and the red closes this past week have shifted the probabilities back to the bear side, reducing the strength of the momentum to the upside seen over the previous 2 weeks. Important earnings reports are due to come out this week with the 24 hour period between Tuesday morning and Wednesday morning being the most important. Popular stocks that are widely followed by everyone, such as AAPL and GS will be reporting during that period of time and will have an impact on the market. If the indexes do start trading below the pivot points mentioned above, especially after Tuesday, technical selling pressure will come in and with little support near-by, the short-term day-traders will push down hard, knowing there is no area close by where the bulls could congregate to defend the indexes. Though Monday is not likely to have much movement, unless there were some fundamental changes of consequence in Asia or Europe, Tuesday and Wednesday will be all together another thing.

Traders will be hanging on to every word this week that comes out from the Republicans and Democrats regarding the debt ceiling and if nothing has changed by next Friday, selling will increase automatically, no matter what happened the rest of the week. The next 2 weeks could be the most pivotal weeks seen since the Lehman closure, with the possibility of surpassing the negatives of that event, if no compromise is reached.