DOW Friday closing price - 10992

The DOW failed to generate any weekly close follow through to the upside to the previous weeks successful retest of the 200-week MA, currently at 10660, suggesting that the traders believe the probabilities favor a downtrend and not just a seasonal correction. The bulls attempted to disprove the late-week selling that was seen the previous Friday with a rally early in the week based on a better than expected ISM Service report as well as on positive words on the economy from Fed Chief Bernake, nonetheless, the rally failed to get above the decent chart resistance between 11482 and 11529 and the bears came in taking the index down to close near the lows of the week and suggesting further downside will be seen this coming week.

From a technical perspective the rally in the DOW was not totally unexpected as the bearish inverted flag formation did show that a rally to test the previous week's high at 11726 was possible and even perhaps needed. Nonetheless, having accomplished that retest successfully and with Euro being on the verge of collapse in Europe, the bulls were unable to keep any kind of positive outlook on the market and succumbed to the fear that a World Recession is on its way.

On a weekly closing basis, resistance is minor to perhaps decent at 11284, again at 11444, and minor one more time at 11734. On a daily closing basis, resistance is minor to decent between 11414 and 11482 and decent to strong at 11613. On a weekly closing basis, support is 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. On a daily closing basis, support is minor to decent at the 11000 demilitarized zone (10970 and 11030), and minor again at 10817. Below that level, there is decent support at 10719.

The DOW had a very bearish day on Friday as all the gains sustained at the beginning of the week were given back on that one day. The action on Friday was especially indicative of disappointment as the index broke a double low close support on the daily chart at 11139/11149 that was supposed to work as a base for the bulls to hopefully generate further upside. That support broke quite easily early in the day and with the close below that level a short-term sell signal was given that suggests a retest of the low daily closes seen a couple of weeks ago at 10719 and 10817 will be seen this coming week.

The action on Friday came close to giving one additional sell signal had the channel line of the inverted flag formation, as well a previous intra-week low, currently both at 10932, been broken. The inverted flag formation gives a downside objective of 9578 and it all begins with the break of channel line. The inverted flag formation and objective would not be confirmed until the recent low at 11603 gets broken, but it does all start with the channel line and that is probably why that level was not broken on Friday, as it would have committed the bears to further downside and with the possibility of Europe coming up with some solution over the weekend (unlikely but possible) it was evident the bears were not ready to take on that commitment on Friday. Nonetheless, if there is no positive solution found over the weekend, the probabilities of the channel line and intra-week support at 10932 breaking on Monday are high. If that happens, a domino-like effect could occur taking the index immediately down to test the support levels at 10800, 10700, and 10600. Small bounces off of each level could be seen, depending on the amount of chart support the traders believe is there, but it is likely that some fundamental good news would be needed to stop the DOW from breaking down all the supports and heading down to 10300 which is where a recession signal would be given.

It is evident by the fact that the DOW has closed in the red on 6 of the last 7 weeks that the fundamental situation is dire. How dire it is, is yet to be clearly defined but the 200-week MA is the chart tool that will help the traders make a better assessment. The 200-week MA is currently at 10660 and with the fact the index closed near the lows of the week the probabilities are high last week's lows will be broken and a drop down to the line will occur. The line has already been tested once successfully 4 weeks ago but the bounce off of that line was feeble at best and therefore a second successful retest needs to be done before the bulls can think about buying again. This suggests that the index will likely get down to the 10600-10700 level this coming week.

With the DOW having had 500+ point trading ranges the last 7 weeks, the probability of another like week happening are high. Resistance this coming week, based on the daily chart is 11243, but on the weekly chart the 100-week MA is currently at 11120, and it is likely that one of those levels will be the high of the week. There is one additional possible high for the week and it is the resistance at 11039 that is on the 10-minute chart and that I mentioned on the message board. Without any fundamental changes occurring, the probabilities are high that 1 of those 3 levels of resistance will be the high this coming week. Taking those three possible highs for the week into consideration and considering at 500+ point trading range, it gives 3 possible downside objectives for this coming week at 10743, 10620, or 10539. All 3 of those objectives are very viable when looking at the supports on the chart.

There is a good possibility, though, that the DOW will make a new 1-year low this coming week, below 11603, as the weak rally this past week, the inverted flag formation, the close near the lows of the week, and the economic scenario all over the world suggests strongly that this is in fact a downtrend and not just a seasonal correction. Even then, breaking the recent lows won't be all that indicative as the index would need to drop and close below 10300 for it to give a recession signal. As such, breaking the recent lows would be more of a chart "thing" than a fundamental statement. As a chart "thing" the probabilities are high of a break of that low as that low is not based on any previous support level and therefore easily broken if the index does get below the 10700 level, which is a support based on previous chart points.

Possible trading range this coming week is 10500 to 11039.

NASDAQ Friday closing price - 2467

The NASDAQ did finally generate a red close on the weekly chart after 2 weeks of green closes. Nonetheless, the index did not break, on a weekly closing basis, the 100-week MA (contrary to what the other 2 indexes did) and has been the strongest of the indexes during the past couple weeks not yet giving any clear or strong indication that it is heading lower. The index seems to be pivoting around the 2468/2480 level on the daily closing chart and on Friday the index once again closed within that area, leaving the door open for a short-term rally or drop next week.

At this moment in time it can be said the NASDAQ is giving slightly mixed signals as to the short-term direction as nothing got conclusively decided on Friday. Nonetheless, the index does also show an inverted flag formation, though slightly askew, and any further downside this week followed by a red close next Friday would put the index back into the same kind of downtrend as the rest of the indexes.

On a weekly closing basis, resistance is minor at 2480 and decent to strong at 2528/2530. On a daily closing basis, resistance is minor to perhaps decent at 2548/2555 and decent at 2579/2580. Above that level, resistance is decent to strong 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, support is very minor at 2419, and minor at 2357. Decent support is found at 2341, minor at 2326 and the minor to decent at 2292 and 2308.

On Thursday, the NASDAQ got above intra-week a previous high of some consequence at 2555 with a rally up to 2568 and it seemed like the index was on its way again to test the 2616 level from which the major break occurred 5 weeks ago. Nonetheless, the index failed to go higher in spite of no resistance being present until 2599/2611 was reached and dropped on Friday in a spike down type fashion making the 2568 intra-week high into a successful retest of the previous high daily close previous week's high at 2579, which in turn had been a successful retest of the 2616 breakdown level. The action seen suggests that without some strong positive fundamental change that the index will now be working to the downside.

The NASDAQ, the same as the other 2 indexes, is also showing an inverted flag formation that if broken (a break below 2331) gives an objective of 2178. Nonetheless, this index is not showing a channel line on the inverted flag formation but a double bottom at 2331/2337, making the support a bit stronger than seen in the other indexes as well as breaks of nearby support not all that indicative. Support will be found at the most recent low at 2414, as well as at a previous low at 2385. The bears have some momentum going their way with spike down type action on Friday and a close near the lows of the day, suggesting that further downside will be seen on Monday. Nonetheless, contrary to what is seen in the DOW there is no catalytic number until 2331 is broken. A break below 2331 would likely push the index down to at least the 200-week MA, currently at 2250.

On a slightly positive note, the NASDAQ broke below the 100-week MA early in the week but did close right on the line on Friday, giving the bulls a bit of hope that if something positive happened in Europe over the weekend that a rally could occur. A rally above 2568 would give the bulls a bit of momentum, perhaps enough to once again test the 2616 level. Nonetheless, the probabilities do favor further downside this coming week.

SPX Friday closing price - 1154

The SPX is now fully in tune with the DOW as far as the chart picture is concerned. The inverted flag formation is identical and the channel line was also reached on Friday, though not broken. Nonetheless, the index will likely be the most indicative this week as it is the only index that is already trading at the 200-week MA, currently at 1150, which means that any red close next Friday in excess of 4 points will cause a break of that line. The SPX has already broken the 200-week MA with the close at 1123 3 weeks ago but was able to negate the break the previous week closing at 1179. Nonetheless, should the index close once again below the line it will be considered not only a break of the line but a failure to follow through as well.

The SPX is also the index closest to giving a recession signal as the index only has to close 58 points lower (5% lower) than Friday's close and only 5 points lower than the most recent intra-week low at 1101. With the biggest problem right now being the banking industry in Europe, and the domino effect that would happen should the Euro fall apart, the fundamental probabilities of the index doing that this week are decent to even perhaps high.

On a weekly closing basis, resistance is minor to perhaps decent at 1176 and decent to now perhaps strong between 1208 at 1218. On a daily closing basis, resistance is minor at 1177, and decent at 1204 and decent to perhaps strong between 1218 and 1225. 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 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 once again pivot around the 200-week MA which will be at 1150 next Friday. Nonetheless, the chart now looks bearish having successfully tested the recent high daily close at 1218, as well as the previous high close before that at 1204. In addition, the index closed near the lows of the day and the week on Friday suggesting that follow through will be seen on Monday. A break below Friday's low at 1148 will break the channel of the inverted flag formation and a break below 1140 will break the most recent intra-week low, likely thrusting the index once more down to the already built triple bottom at 1119/1121 (daily closing chart), giving the index high probabilities of breaking that level as well. As such, the bulls will likely be on the defensive and with very little ammunition to stop the index from going lower.

Below 1100 level there is no support until the mid to low 1000's is reached, which means that a recession signal will likely push the index down to test the 1000 level, with a slight possibility the index will get down into the mid 900's as that is a chart objective based on the action seen the last 7 weeks.

Should the SPX show any recovery ability, Thursday's high at 1204 will act as strong resistance at this time. Above that level, the 1208 to 1218 level should now be very strong resistance as well, unlikely to get broken without some good news. In addition, resistance is also found between 1174 and 1186 from the 50, 100, and 200 60-minute MA's. Based on the action on Thursday, the probabilities of a rally up above those levels this week is very low.

A possible positive catalyst was introduced on Thursday night in the way of a Jobs plan presented by the President to stimulate more jobs and get rid of some of the unemployment, hopefully stimulating GDP growth and recovery of the economy. Nonetheless, the reaction to the plan was not positive as it requires bipartisanship to get the plan adopted and so far the Republicans have not yet embraced it, leaving doubts that the plan will stand as proposed. That was one of the reasons the market fell on Friday. The other more compelling reason for the fall on Friday is the high probability of a default by the Greek government on their debt (probabilities now at 92%) and if that happens it could be a catalyst for the Euro falling apart and each individual nation going back to its own currency. Such an occurrence would likely collapse many financial institutions causing a domino-like effect on the entire world. There seems to be little hope of a positive resolution being found and that may be enough of a catalyst to prevent anything else from stopping a world-wide recession.

The action seen on Friday was negative but supports levels held, likely because of the slight possibility that some resolution to the European crisis would be found over the weekend. Nonetheless, if nothing positive comes out from Europe by Monday morning, it is highly likely the indexes will continue the weakness shown on Friday and breaks of support occur, causing strong selling to further appear, and the recent lows to be tested. It is evident that the market is hanging by a thin thread that without some fundamental help is likely to break.

With so much riding on what happens in Europe any positive change of the fundamental picture here is the U.S. might not be sufficient to stop the market from falling. As such, the probabilities of a downfall coming are high, more so this coming week than last week. Last week there were some technical factors that could help the bulls stage a rally, as was seen. This week, though, those technical factors no longer exist and that means that unless some positive fundamental piece of news comes out, the probabilities will be high of the indexes falling down strongly and the bulls simply playing a defensive game trying to prevent the worse from occurring. No economic reports are due out the first 2 days of the week and even the reports due to come out the rest of the week are mostly "B" kind of reports and not likely to help the market even if positive. Nonetheless, all of that may be moot as the probabilities are high that decisions will be made by Monday morning, based on what happens in Europe over the weekend.

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