DOW Friday closing price - 12441

For the fourth week in a row the DOW generated a red close on Friday, adding fuel to the idea that the seasonal correction has started. Nonetheless, the start of the correction has not yet been confirmed as a weekly close below the previous 2 high closes at 12393 and 12426 needs to occur before the bears can feel confident further downside will occur. The index did get below those 2 levels intra-week for the past 2 weeks but the bulls have been successful in generating enough buying at the end of the week to keep the failure to follow through signal from being given and the correction from getting an official start.

It is interesting to note that the DOW has not closed in the red for more than 4 weeks in a row since Oct02 (had 5 weeks in the red then). This even includes the period back in Dec08-Mch09 when the index was collapsing from a high of 9065 to a low of 6470 over a period of 9 weeks. Nonetheless, interspersed exactly in the middle of that drop (the 5th week) was one green close. With the fact the index closed slightly in the upper half of the week's trading range it is possible that some upward movement will be seen this week, especially since the index has not yet shown a weekly retest of the recent highs at 12875 and a rally above last week's high at 12511 could provide that. In addition, the index did get close to the 20-week MA, currently at 12260, with a drop down to 12309 and bounced up from it, suggesting a successful retest of that line might have been seen last week.

On a weekly closing basis, resistance is minor to decent at 12810. On a daily closing basis, resistance is minor at 12605, very minor at 12695, minor to decent at 12760 and decent at 12810. On a weekly closing basis, support is minor at 12341 and decent at 11858/11893. On a daily closing basis, support is minor at 12356 and decent at 12202. Minor support is found at 12058 and strong support at 11613.

On the economic reports front, there are only 3 economic reports due out this week, all to come out on Tuesday morning by 10:00am (Case- Schiller 20-city Index, Consumer Confidence, and Chicago PMI). None of these reports are all that important but with the market being so fragile right now it could give some direction to the DOW for the week. A green close next week is likely as there has not been 5 red closes in a row since Oct02. Nonetheless, if the index does head lower and ends up closing out the week in the red, especially if it is below 12391, it would be a very bearish sign and a strong drop in price down to the 12.000 could be seen the following week.

As far as resistance in the DOW is concerned, there is no resistance on the weekly closing chart until 12810. Nonetheless, it is highly unlikely the index will be heading up to that level as the fundamental news at this moment does not support that idea. On the daily chart, though, the index now shows a definite downtrend with 3 successful daily close retests of the high at 12760, 12695 and 12605. The downtrend line is now right around 12560. From a purely technical basis it is possible that some upside movement will be seen this week, though it is unlikely the recent downtrend will be broken, which would make the 12605 level, on a daily closing basis, quite important.

To the downside, the DOW shows minor support on the daily chart at Wednesday's low at 12309. Below that, the 20-week MA, currently at 12260 and the 100-day MA, currently at 12220 would be the next and more important support levels to watch. On a more sensitive basis, the 60-minute chart shows the 20 60-minute MA, currently at 12415 and a previous intra-day support at 12378 as the levels of support intra-day.

Probabilities do favor the DOW closing in the green this coming week, at least by a small amount, but the reports will have some impact. In addition, the fundamental news continues to come out on the bearish side making it difficult for the bulls to do anything more than generate small rallies intra-day. The trading range is more difficult to determine as Tuesday's economic reports will likely set the stage bringing into play 2 difference trading range scenarios, with the first one being 12378 to 12560 if the reports are as expected or slightly better, or 12260 to 12483 if the reports are as expected or worse. Either way, a green close is likely.

At some point during the next 1-3 weeks it is probable the DOW will see a strong downward movement with 12000 as the first objective. The bulls have lost most of the strength they had during the past 6 months and there is nothing positive scheduled on the horizon that could change that. By the same token, there has not been any news yet that can work as a strong negative catalyst either. Continued deterioration, with some two-way movement is the expected scenario.

NASDAQ Friday closing price - 2796

The NASDAQ confirmed the failure to follow through signal given last week closing for a 2nd week in a row below the Oct07 high weekly close at 2810. Nonetheless, the index was successful in closing above the 20-week MA, currently at 2776, on Friday, though during the week it traded mostly below that level. The index was the strongest of the three this past week, closing just a few points below the high of the week (2801) and suggesting that some upside will be seen this coming week with the intra-week high seen in February of this year at 2840 looming like a probable objective. On a weekly closing basis, though, the 2810 Oct07 weekly closing high will be difficult to break. As such, even if the index shows some strength this week, the probabilities do not favor a substantially higher close next Friday.

Without any major negative fundamental news having caused the failure to follow though signal given, the NASDAQ has a high probability of having the previous 10-year high seen a few weeks ago at 2887 tested, before further downside will occur. Any rally above a previous week's high can be considered a retest and therefore all the index has to do is go above last week's high at 2801 this coming week. If that happens and the index fails to break that high the following week, it will be considered a successful retest.

On a weekly closing basis, resistance is minor to decent at 2810 and decent at 2873. On a daily closing basis, resistance is minor at 2799, 2823, minor again at 2833, and minor once more at 2863. Decent to perhaps strong resistance is now found at 2871/2873. On a weekly closing basis, support is minor at 2764 and minor to decent at 2686 and decent 2643. Below that there is now support until the low 2500's are reached. On a daily closing basis, support is minor 2782, minor to decent at 2746 and at 2735, and minor again at 2686. Decent support is found at 2612.

The NASDAQ had an eventful technical week having gapped down on Monday, breaking below both the 50 and 100 day MA's in the process, closing the downside gap from April 19 at 2746, and then turning around and closing Monday's gap as well as closing above both of the MA's on Friday. What this type of action likely means is that there is weakness in the chart but the index is not yet totally ready to head lower. The likely reason for that is the need of a technical retest of the highs before a short-term downtrend/correction can occur.

Resistance is copious and indicative above. First of all, the NASDAQ shows a decent intra-week high, as well as the 20-day MA, both at 2815. Reaching this level would fulfill the need for a retest of the highs but if the index is unable to go higher it would show that the bears have the upper hand and that the index is heading substantially lower. The second resistance level is at the most recent high at 2828. In essence, the index should not go above that level if a downtrend has begun. Having successfully tested the 10-year high at 2887 twice on the "daily" chart with rallies up to 2873 and then the most recent at 2828, if the downtrend has begun the 2828 high should not be broken. The third resistance, and likely the strongest, is the February high at 2841. A test of that level, followed by a failure thereafter, would likely suggest that a correction will occur but that the correction would be somewhat mild. With these levels so clearly defined in price and in meaning, the index will be a good indicator this week of what to expect in the next couple of months.

Support is also somewhat varied with 2782, on a daily closing basis, being a minor support but also where the 50-day MA is currently at. The next support at 2746 is a bit more important as it was the daily low close for the week as well as below the 100-day MA. If that support is broken, and the index starts trading below the April 18th low at 2735 the probabilities would strong increase that the index would drop down to the 2686/2700 level where weekly close support is decent.

The action this coming week in the NASDAQ, if Tuesday's economic reports are not way out of line, is likely to be two-way with Friday's close (unchanged) being somewhat a pivot point for the week. In looking at the chart, I do expect the index to get up to 2815, which would be up about 19 points at some time, as well as down to around the 2760 level (decent support on the 60-minute chart), which would be down about 40 points on the week.

The most likely scenario in the NASDAQ is that the index has topped out, is on a downtrend, and that continued failure will be seen for the next 4-6 weeks. Nonetheless, from a purely chart point of view, the index needs to show at least a minimum retest of the highs and a failure thereafter, before the bears can feel comfortable shorting the index more aggressively. As such, this coming week is likely to be a "pause" week for the chart formations to be fulfilled.

SPX Friday closing price - 1331

The SPX, on a weekly closing basis, has been generally treading water for the last 4 weeks generating consistently lower weekly closes (4 in a row to be exact) but not in an aggressive way. The index, on a weekly closing basis, was once again able to close above the 20-week MA, currently at 1321, suggesting that like the DOW the index could see a green close this coming Friday. It should be noted that SPX did have 6 weeks in a row of red closes back in May08 suggesting that another red close is possible.

The SPX continues to be slightly under more selling pressure than the rest of the market inasmuch as Greece is under a default watch and if that happens, the financial community is likely to get the brunt of the selling. By the same token, defaults in Europe from Greece, Portugal, and possibly even Spain, have been talked about for so many weeks, without anything tangible happening, that traders have become somewhat inure to the situation.

On a weekly closing basis, resistance is minor at 1343 and decent at 1363. On a daily closing basis, resistance is minor to decent at 1335 and decent at 1343. Above that level, there is minor resistance at 1348, minor again at 1357 and decent at 1363. On a weekly closing basis, support is minor at 1319 and decent between 1276 and 1279. On a daily closing basis, support is minor at 1328, minor to decent between 1314 and 1316, decent at 1305/1306, and decent at 1298/1300. Below that level, minor to decent support is found at 1276, and decent to strong at 1256.

Like with the DOW the SPX is showing 2 previous successful retests of the 1363 weekly closing high at 1357 and 1343. The resistances above in the SPX are very similar to the ones found in the DOW with 2 or 3 levels of importance above. Nonetheless, the resistance at 1343 is of particular interest as it was the 75% Fibonacci number that held up for a total of 9 weeks before breaking and is also the most recent high seen just 7 trading days ago. More importantly it represents the third point in the recent downtrend line, meaning that if the index is able to close above that level any day next week, the downtrend would be broken.

The SPX also shows resistance at 1339 from the intra-week highs seen the first week of April as well as where the 20-week MA is located. That level is also important as it represents where the downtrend line mentioned above is currently at. It is a viable and likely objective for the week, especially considering the likelihood of a green close next Friday. Nonetheless, it is also a level that if broken could give the bulls added ammunition they have not had for weeks.

As far as support is concerned, the daily closing low seen on Tuesday at 1316 must be considered important short-term support, especially since it also represents the 100-day MA. A break of that level would likely thrust the SPX down to the 1294/1300 area.

Possible trading range for the week is 1339 down to 1321.

The indexes continued to deteriorate generating another red weekly close. Nonetheless, they did show a few signs of life in the last couple of days and closing near the highs of the week, suggesting that this coming week could be a slight rally or at worst a pause week if the reports on Tuesday are not overly negative. The reports due out on Tuesday morning are the Case-Schiller 20-city Index, the Consumer Confidence number, and the Chicago PMI. The reports are all "B" kind of reports that could have some impact if way out of line but not aggressively so.

The indexes have not yet given a sell signal on the weekly chart and as such the bulls continue trying to generate a rally and a return to the uptrend. Unfortunately for the bulls the economic news remains slightly on the bearish side and unlikely to change any time soon, preventing any new aggressive buying from being seen. By the same token, the news has not been overly negative and with the Fed continuing to support the market, at least until the end of June, the bears have not had enough ammunition to cause the break to occur. Ultimately deterioration should generate the needed sell signals leading to the seasonal correction expected. Nonetheless, it should not be a fast and strong move down but more likely gentle erosion leading to a soft landing somewhere over the next 4-8 weeks.