DOW Friday closing price - 12681

The DOW closed above the previous week's high close at 12657, negating what was considered at the time a successful retest of the 12810 36-month weekly high close. The bulls enjoyed a week with positive earnings reports that supported the short-term resumption of the uptrend. Nonetheless, in spite of the earnings good news, the bulls were unsuccessful in reaching the 12810 level or even getting above the previous successful retest at 12753, mainly because of the uncertainty regarding the debt ceiling issue which kept the bulls from being aggressive.

The DOW did close near the highs of the week and technically speaking should see higher prices. Nonetheless, the bulls will not have fundamental help as the talks between Democrats and Republicans broke down Friday afternoon and unless something positive happens over the weekend (unlikely) the indexes will likely open lower from the fundamental negatives associated with a lack of compromise between the parties.

On a weekly closing basis, resistance is minor at 12743/12769 and strong at 12810. On a daily closing basis, resistance is minor to decent at 12719/12724, minor at 12760 and strong at 12810. On a weekly closing basis, support is minor at 12479, minor again 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.

The DOW had a positive classic reversal week going below the previous week's low, above the previous week's high and closing above the previous week's high. Such action, from a purely technical perspective, would likely generate enough follow through to the upside to take out the 36-month high at 12875 and move up to the 13000 level. Nonetheless, the week will be dominated by the debt ceiling debate and technical matters will likely take a second seat to that fundamental issue. With the talks breaking down late Friday afternoon after the market closed, the probability favors a lower opening on Monday, perhaps even a strong lower opening. As such, technical issues are undependable this coming week.

The Head & Shoulders formation mentioned in the newsletter last week as a possibility has likely lost any strength it might have had when the index rallied back up to the right shoulder high at 12753. Nonetheless, there is still a tiny possibility of it becoming one if the DOW sees no further upside. By the same token, the red close on Friday opened up to the door to a possible double high on the daily closing chart at 12719/12724. If the DOW closes in the red on Monday it will gain strength and a close below 12571 would give it even more strength, likely causing new selling to appear.

To the upside, it is evident that the 12753 resistance area has become a stronger resistance with Friday's rally up to 12751 and a subsequent red close. A break above 12753 and/or a close in the DOW above 12719/12724 will likely thrust the DOW up to the 12875 high seen in May and perhaps into a new 36-month high as well. To the downside, the 12500 area has now become indicative support and if broken, it would likely mean something negative is amiss. As such, the 12752 and 12500 levels bear watching this week.

By the same token, this week will be all about the debt ceiling issue and whether the Democrats and Republicans can come to a compromise. Both sides seem to be entrenched and as the August 2nd deadline gets closer the market will act more negative if no comprise is seen to be in the works. That is likely to be the "only" issue on the board this week. Compromise means higher prices and lack of compromise means lower prices. It's as simple as that!

NASDAQ Friday closing price - 2858

The NASDAQ, like the DOW, had a classic reversal week with a close near the highs of the week. Technically speaking, the index should see further upside this week breaking the previous 10-year high at 2888. In spite of the positive rally, though, the index did not get close to the previous intra-week high or even up to the previous double top weekly closing high at 2873 suggesting that if no follow through to the upside is seen this week, and a red close occurs next Friday, that a major top will have been built.

The NASDAQ has been the recipient of some very favorable earnings reports with AAPL and GOOG having reported much better than expected results this past week. This coming week, 2 more of the "biggies" report with NFLX reporting Monday after the close and AMZN reporting Tuesday after the close. Though it is likely the index will be pivoting this week on the debt ceiling issue, if those earnings reports match the ones from last week it will be difficult for the bears to stop the index from heading higher.

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 strong at 2871/2873. On a weekly closing basis, support is minor at 2789, very minor at 2764, and minor again 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 2814 and at 2762, minor at 2746 and minor to decent at 2722. Below that level, there is 2686 and strong support at 2616.

The NASDAQ shows a triple top on the daily closing chart between 2871 and 2873. From a technical perspective, triple tops are generally broken and therefore the probabilities are high the index will head higher and close above that level one day this week. By the same token, on the weekly chart, the same level shows a double top which is a strong resistance. With the indexes all pivoting this week on the debt issue, it is difficult to give probability numbers on what will happen this week, with the index having 2 important earnings reports due out on Monday and Tuesday, there is a possibility the index will close in new 10-year highs on the daily chart but fail to do the same on the weekly chart if the debt ceiling issue is not resolved by Friday.

To the downside, the 2796/2800 level will be considered important support this week with 2814 being a semi important short-term daily closing support. If broken, drops back down to the 2760 level would likely occur and that level is certainly much more important to the index as a close below that level would push the index back down to 2616 that is pivotal weekly close support.

It is likely that by Wednesday morning, after the earnings reports on AMZN and NFLX come out, that the index will give a strong probability number on the technical direction the index will follow thereafter. Nonetheless, like all the indexes, much will depend on what is decided this week on the debt ceiling issue.

SPX Friday closing price - 1345

The SPX continued to be the weak sister this past week as it was the only index that closed minimally above the close seen 2 weeks ago at 1343. In addition, the index failed to close above the level which has been a strong resistance and pivot point on both the daily and weekly chart for the past 5 months at 1343/1345. The failure to get above that level also means that big questions remain about the banking industry in general, apart from the debt ceiling issue.

The SPX did get a slew of earnings reports over the past 2 weeks and generally it can be said the financial industry remains subdued, not showing the same earnings strength that is being seen by the overall market. As such, the index remains more of a follower than a leader. That tag should remain for the short to mid-term no matter what happens to the debt ceiling issue.

On a weekly closing basis, resistance is decent to possibly strong at 1343/1345 and decent to strong at 1363. On a daily closing basis, resistance is decent at 1343/1345, decent again at 1356 and strong at 1363. On a weekly closing basis, support is minor at 1316/1319, 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 is still a brake in the market as technically speaking the index chart is leaning more toward the downside than the upside. If the index closes in the red on Monday and confirms the red close on Tuesday, Friday's close will be a second successful major retest of the 36-month high daily close at 1363. From a purely technical perspective, that would mean the index would need to get some strong fundamental news to break the negativity of such chart action.

To the downside, the 1305 level on the daily closing chart and the 1316 level on the weekly closing chart are important short-term supports. A closed below those levels would change the chart into a strong short-term negative. To the upside, the 1363 level is the key. A close above that level on both the daily and weekly chart would suggest the SPX will be going up to the 1400 level which many analysts have predicted will be reached before the end of the year.

Like with all the indexes, the debt ceiling issue remains the most important factor in trading this coming week.

The debt ceiling debate has now taken center stage and the indexes will likely pivot, almost on a day to day basis, on what news comes out regarding that issue. The talks between the Democrats and Republicans broke down on Friday afternoon as both parties remains fundamentally opposed to what the other party is keying on. Though the issue is of utmost importance, the probabilities keep on rising that it won't be resolved as neither party seems to be willing to give up on what it wants to accomplish. If the issue is not resolved, the effect on the market would be strongly bearish.

The earnings reports as well as recent chart action in the indexes suggests that if the debt ceiling issue was not present that the indexes would be making new 3-year highs this coming week. Nonetheless, technical trading will be taking a back seat to the fundamental news regarding the debt ceiling issue until it is resolved. August 2nd is the deadline for a compromise. If that date is surpassed without a compromise by the parties, it won't much matter what happens thereafter as permanent damage will have been done to the credit credibility of the U.S, likely causing all positive fundamental analysis to change for the negative.