DOW Friday closing price - 11951

The bulls were unsuccessful this past week in holding the DOW above the 12000 level demilitarized zone (11970-12030) as the index on Friday dropped to 11937, closed near the lows of the day/week, and below 11970. The action suggests that the drop being seen is not a correction but the beginning of a downtrend as there is normally a decent amount of buying at strong support levels, such as 120000, when a correction is occurring.

In addition, the DOW is now showing 6 weeks in a row of red weekly closes and that has not happened even once in the last 10 years. There have certainly been periods of time when the index dropped down significantly in price over a period of 8-10 weeks, much more so than what has been seen up to now, but not 6 weeks in a row and not during corrective phases, such as was seen during the 2003 to 2006 time frame where red weekly closes numbered no more than 4 in a row and were followed by 2-3 weeks of green closes. With the consecutive string of red closes strong doubts are starting to enter the minds of the bulls which in-turn could lead to more profit taking, new short positions being put on or added, and not enough buying to stem the tide.

On a weekly closing basis, resistance is minor to decent at 12391, and strong at 12810. On a daily closing basis, resistance is minor at 12124, minor to decent at 12383 and again at 12605. Above that level, resistance is very minor at 12695, minor to decent at 12760 and decent at 12810. On a weekly closing basis, support is at decent at 11858/11893 and minor to decent at 11092/11100. On a daily closing basis, support is very minor at 11823 and decent to strong at 11613.

The DOW closed on the lows of the day and of the week on Friday and follow through to the downside is expected to be seen on Monday. There is absolutely no previous support seen until minor support on the daily chart is found at 11803 (11823 on the daily closing chart). Even then, that support on the daily chart is minor at best. The 200-day MA is currently at 11700 and that is now a very viable objective for this coming week inasmuch as the index had a 248 point trading range last week and based on where the index closed on Friday, the 11700 level is reachable using that same trading range for this coming week. The strong support is found at 11555 which was a major spike low seen on March 16th. It is unlikely that the index will get down that low this coming week, but if it does and that level is broken, panic selling will likely occur.

Resistance will now be the demilitarized zone. Having closed below that level on Friday, it is unlikely that the DOW will be able to get above that level without fundamental help. Nonetheless, this coming week does have an array of decently important economic reports due out, starting with Tuesday's Retail Sales number. Additional reports this week include PPI, CPI, Industrial Production, Capacity Utilization, Housing Starts, Building Permits, Philadelphia Fed, Michigan Sentiment and Leading Indicators, not to mention the weekly Initial Claims report on Thursday. As such, the DOW, once the technical chart follow through is seen on Monday, will likely trade off of those reports.

The big problem is that the economic reports have recently been worse than expected and if that trend continues this week the bulls, having lost much of the power they have enjoyed for the last 6 months, could actually begin to panic and sell aggressively, especially if more definite signs that this is not a correction but the beginning of a downtrend are seen.

The key is likely to be the 200-day MA in the DOW, currently at 11700. The 200-day MA is often a very important pivot point between a strong correction to an uptrend, and a change of direction. Drops down to that level will likely be seen, if not this week, very soon. A close below the 200-day MA would be seen as a negative, especially if confirmed with a break below the March 16th spike low at 11555.

Drops down to the 11555-11700 level have been expected to be seen during this corrective phase. Nonetheless, those levels were not expected to be seen until late July or early August as the move down was supposed to have peaks and valleys along the way. If the 11555/11700 level is reached this coming week, which is a 9-10% correction and within the likely boundaries of what a seasonal corrective phase will allow, further drops will be expected to happen as there are still the next quarter earnings reports to weather, which start the first week of July and are also likely to show more of a slow-down in the economy.

Simply stated, if the 11555 level is broken any time in the next 2 weeks, the mood will change from "let's buy the strong correction" to "let's get out before it's too late". Such a break would bring the 10,000 level into view as a viable objective and a drop down to there would be more than a 20% correction and a true sign that a downtrend and double dip recession are back in place.

From that point of view, this coming week is very important to the DOW, especially since there are so many reports that will have an impact on how the economy is actually working. With the Fed not likely to come up with any further stimulation of the economy, the reports will be heavily relied upon to predict what is likely to happen during the next 3-6 months. As such, this coming week is beginning to look like a pivot week of some importance.

Keep in mind that the next quarter earnings reports start in the second week of July (4 weeks away), and those are also expected to show a slow-down in company profits, likely exacerbating the move down. If the DOW is unable to generate a rally prior to the earnings reports, the probabilities will strongly lean toward a downtrend and double dip recession. That is what is facing the bulls this week. They need to generate at least the beginning of a rally by week's end, without allowing the 11555/11700 area to break.

It is difficult to predict the probabilities this week as much is dependent on reports and not on charts.

NASDAQ Friday closing price - 2643

The NASDAQ took the brunt of the selling this past week leading the way down among the indexes by getting very close to the March 16th spike low at 2603 as well as to the 200-day MA, currently at 2629. This action was unlike the other indexes, especially the DOW, which still have a fair amount of downside to be seen before those same levels are reached on their individual charts. It could be indicative, though, that the index seems to be once again taking the lead in the index race, especially if the level of support close by is broken, as this was the index traders followed originally on the way up, and could be the same thing on the way down.

The NASDAQ closed on the lows of the week and at exactly the same weekly closing spike low seen the week of March 16th. A red close next week will give a strong sell signal on the weekly chart and likely thrust the index down to the major psychological support area at 2500, putting the index at risk that if 2500 is broken, a downtrend (not a correction) will be in place.

On a weekly closing basis, resistance is minor at 2789, decent at 2810 and at 2833, and decent to strong at 2873. On a daily closing basis, resistance is minor at 2684/2686, decent at 2798/2799, minor at 2823 and at 2833. Strong resistance is now found at 2871/2873. On a weekly closing basis, support is decent 2643. Below that there is no support until the low 2500's are reached. On a daily closing basis, support is decent at 2612 and then nothing until minor support is found at 2467.

The NASDAQ is facing a pivotal daily close support level at 2616 (2603 intra-week) this coming week. That was the low daily close seen on March 16th when the index was in the previous correction of 8% that took the index down from 2833 to 2603. A break of the previous corrective low would be a strong signal that this drop is more than a corrective phase as correction lows are not generally broken unless a trend has changed. With the index closing near the week's lows at 2643 on Friday further downside is likely to be seen this coming week. The first support level the index will face is the 200-day MA, currently at 2629. That level is most likely to be seen at the beginning of the week and should generate some kind of a bounce as the traders are not likely to be aggressive to the downside until the economic reports come out this week.

The economic reports are due out every day starting on Tuesday and all have about the same importance, give or take a bit. As such, there is no one report that is likely to be the guillotine or the angel from heaven. Nonetheless, if all reports come out worse than expected, as economic reports have recently been coming out, drops down to the 2603 level are likely to occur by next Friday and if that level is broken, things will get ugly.

Resistance is not close by as the NASDAQ does not show much resistance until the 100-day MA, currently at 2767, is reached. There is some minor psychological resistance at 2700 as well as another minor intra-week high at 2696, but those are not resistances of consequence. This is unlike the DOW which shows decent resistance at the demilitarized zone. This means the NASDAQ could end up being the leader to the upside if a bounce occurs. If the index is able to get above 2700, you could easily see another 67 points in a short period of time.

The parameters for the week are clearly set with 2629 (200-day MA) as a likely low, 2603 as the important support, 2700 as the minor resistance and likely objective if the index is just trading, and 2767 as the upside objective if the index bounces up indicatively.

SPX Friday closing price - 1270

The SPX, unlike the other indexes, gave a strong sell signal on the weekly closing chart by closing below a previous weekly close support of consequence at 1279. The index now has a clear path down to the strong intra-week support seen the week of March 16th at 1250 (1256 on a daily closing basis). The probabilities are high that the index will get down at least to the 1253 level which is where the 200-day MA is currently located.

The SPX is evidently being targeted by the bears inasmuch as there continues to be strong financial problems in the world, starting with a Greek problem that is likely to get worse, rather than go away. In addition, the problems with Goldman Sachs are also in the news and with GS being the #1 financial institution out there, the short money is keying on the index.

On a weekly closing basis, resistance is minor at 1293/1296, decent at 1343 and decent to strong at 1363. On a daily closing basis, resistance is minor at 1289, minor again at 1305 and at1316, minor to decent at 1332/1325 and decent at 1343/1345. On a weekly closing basis, supports are all minor at 1239/1242, at 1189, and at 1166. On a daily closing basis, support is decent at 1256 and then nothing until minor support is found at 1178.

The SPX finds itself in a very precarious chart situation inasmuch as the daily close support at 1256 is "it". Below that level there is absolutely no support of consequence that can be depended upon to hold firm for another 200 points lower, other than the psychological support at 1200. As such, the index finds itself facing a week where there are many catalysts that could cause the index to break indicatively and no catalysts that could be considered to be strongly positive. Simply stated, the key word this week for the bulls will be "survival".

To the upside, the SPX will now show minor to decent resistance at 1294 from the high seen on Thursday as well as from 3 previous daily lows of consequence as well, and strong resistance at 1313/1316 where a previous high of consequence is seen on the weekly chart, as well as where the 100-day MA is currently at.

Having closed on the lows of the week the probabilities are high the index will see some follow through to the downside on Monday with the 200-day MA, currently at 1256 as the objective. A bounce from that level is highly probable though, as the bears are not likely to be aggressive to the downside until most of the economic reports due out this week are seen. Possible trading range for the week might be something like 1256 to 1294.

The indexes started to break down this past week and the closes near the lows of the week suggest further downside will be seen, at least at the beginning of the week. The possibility of a strong down week exists as important long term support levels, in the form of the 200-day MA's, are close by and if the economic reports due out this week continue to come out negative, as they have been recently, those levels could break causing some panic selling to occur. Panic selling has not been seen for the last 3 years, mainly because traders were sure that the Fed would continue to do everything in their power to support the market, nonetheless, that confidence has begun to erode due to recent comments by Fed chief Bernake stating that the market has to begin standing on its own, as well as increasing pressure from main street to stop printing money to keep throwing at the problem.

Based on the weakness shown on the close on Friday in all the indexes, probabilities favor drops on Monday down to the 200-day MA in each of the indexes, but it is likely that those lines will hold at this time unless they reports are overly negative. Chart-wise, some technical buying is likely to be seen this week from those lower levels causing the indexes to show some recovery by the end of the week, likely generating further advances the following week, setting the stage for when the next quarter earnings reports start coming out the 2nd week of July. Nonetheless, it is very evident that the bulls have their backs against the wall as there are far more negative catalysts available that positive ones. If none of those negative catalysts appear, the probabilities favor the indexes generating a recovery rally over the next 3 weeks.