DOW Friday closing price - 12154

The DOW generated a green close on Friday making the previous week's close at 11983 into a successful retest of the 50-week MA, currently at 11920 as well as of the previous strong support level at 11934 that was in place from March through July. The green close keeps the recent uptrend intact and suggests that further upside will be seen this coming week, especially since the index closed on the highs of the week and only 78 points from the highest daily closing seen since July 28th. By the same token, even with the positive news that came out on Friday the DOW fell short of closing above the most recent daily high close at 12170 in spite of the fact the index reached that level early in the morning session and traded at that level for most of the day, suggesting that the traders are still not convinced the index will be heading higher.

The DOW showed strength based on positive news from Europe that the Bond rates in Italy had fallen back down to the 6% level, from the unsustainable rate of 7.5% that had been seen earlier in the week, as well as from the fact that the Italian Parliament has voted positively on adopting the austerity measures that are being imposed on them. In addition, hope was also renewed with news that new Prime Ministers will be put into place in Greece and Italy, suggesting that the change in government could end up being a positive.

On a weekly closing basis, resistance is minor to decent at 12231, minor at 12391, decent at 12681 and strong at 12810. On a daily closing basis, resistance is minor 12170 and minor to decent between 12231 and 12258. Above that level, minor to decent resistance is found between 12391 and 12426, decent to strong at 12724 and strong at 12810. On a weekly closing basis, support is minor between 11934 and 11983 and decent at 11858. Below that level there is no support until minor support is found at 11509. On a daily closing basis, support is minor at 11980 and minor again between 11898 and 11951. Below that level, support is minor at 11706 and decent at 11657. Below that level, there is decent support at 11613.

On a chart basis, the DOW has built a bullish flag formation on both the daily and weekly chart with the flagpole being the rally from 10404 to 12284 and the flag being the trading range between 11630 and 12284 that has been seen for the last 3 weeks. A break above the top of the flag at 12284 will give an objective of 13510 and a rally just 5% from the all-time highs. Though the upside objective is reachable from a chart point of view as well as from a seasonal perspective, fundamentally speaking the slowdown in the economy and the continuing financial ills being seen world-wide seem to make reaching that objective unrealistic at this time.

The inability to break above the most recent intra-week high in the DOW at 12187 on Friday, though the index got up above 12170 on 7 different occasions during the day, has to be worrisome to the bulls as most of the possible good news that could come out of Europe at this time came out that day. With nothing additional to be scheduled this weekend, there is little fundamentally that could happen that would cause new buying to occur. By the same token, the index did close near the highs of the day and has also built a bullish flag formation on the 60-minute chart that if broken (a rally above 12179) would give a 12405 objective for Monday's trading. As such, the charts do suggest that a break above the high seen on October 27th at 12284 will occur and quite possible as early as Monday. With limited economic reports due out this week, the probabilities do favor the index training technically and that does open up a couple of different scenarios that bear watching.

The first scenario, and most probable one, is a break above Friday's high at 12179 that would likely generate enough chart buying to take the index above the 12284 level and up to the flag objective on the 60-minute chart to 12405. A rally above 12284 would cause the flag formation on the daily and weekly chart to kick in, the one that has a 13510 objective, and since flags do have some very clearly defined guidelines to be followed the index would have to show strong follow through with a rally up to that level in a period of about 3-6 weeks. As such, A break above 12284 this coming week would set into motion a set of chart events that if not followed would be seen as a failure to follow through and all the factors that go with that.

Since everything starts with the flag formation on the 60-minute chart and the close near the highs of the day/week on Friday, what needs to be watched on Monday is 12187 and 11970. A drop down to 11970 will negate the flag formation on the 60-minute chart and likely push traders back toward the short side, while a rally above 12187 would start the domino-like scenario mentioned above and all the commitments that go along with it. As of this writing (Sunday afternoon) there has been no news that would suggest one direction or the other and therefore it is difficult to anticipate what will happen tomorrow morning. Nonetheless, the 2 levels mentioned are what the traders will be watching to make their decisions on what to do the rest of the week.

Probabilities do favor the upside and a rally up to the 12405 level this coming week but then the picture gets very cloudy inasmuch as there is decent resistance between 12393 and 12450 that fundamentally speaking should be strong enough to prevent further rallies. If the resistance at that level is enough to stop the rally, the DOW will then likely give a small failure signal, move back down to the 200-day MA, currently at 11980, and likely close the week around that line awaiting further economic information before deciding what to do for the rest of this year. I would say this scenario is the most likely scenario to occur, with a possible trading range this coming week between 12405 on the upside and 11920 on the downside.

NASDAQ Friday closing price - 2678

The NASDAQ ended up generating a red close (unlike that of the other indexes) further making the outlook cloudy, especially since the index has been the leader to the upside and the lack of leadership this past week suggests that the bullish chart patterns in the other indexes may not be fulfilled. In addition, the index did go above the previous week's high but did close below the 50-week and 200-day MA's, currently at 2686 and at 2688 respectively, suggesting that the index is not acting as bullish as it could and may be generating a successful retest of the recent weekly high at 2753.

On a positive note, the NASDAQ continues to show a bullish flag formation on the weekly chart that if broken (a rally above 2753) does give an 11-year high objective at 2920. Nonetheless, by closing 75 points below that recent high and with few (if any) additional positive catalysts scheduled for the next few weeks, the probabilities of the index accomplishing that bullish chart scenario seem to be very low.

On a weekly closing basis, resistance is minor at 2737, decent at 2833, decent to strong at 2859 and strong at 2873. Above that level there is no resistance until psychological resistance is found at 3000. On a daily closing basis, resistance is minor at 2697/2699, minor to decent at 2727 and decent at 2738. Above that level, resistance is minor at 2765, minor to decent at 2799 and decent at 2833. On a weekly closing basis, support is minor between 2637 and 2643 and decent to strong at 2616. Below that, minor support is found at 2595 and minor to decent at 2505. On a daily closing basis, support is minor at 2638 and strong between 2599 and 2616.

The NASDAQ was not the leader to the upside this past week and that has to be considered significant. Nonetheless, the index did close on the highs of the day on Friday and further upside is likely to be seen on Monday with 2705-2725 as the objective. Such a rally of 27-47 points could match up with the DOW rallying up to the 12405 level. By the same token, if the index is unable to get above the most recent high at 2727, nothing will be accomplished positively. The 200-day MA, currently at 2690, will continue to be an important indicator this coming week as several closes in a row above that line would be considered a bullish sign, while the opposite is also true if the index continues to close below the line.

The NASDAQ has now traded in a sideways fashion for the last 4 weeks mainly between 2600 and 2700 and the inability to stay above the 2700 level for any more than a day or two at a time suggests that the bullish rally from 2298 that started 6 weeks ago has fizzled and that unless some additional positive fundamentals occur that selling will come back in soon. By the same token, the index has not been able to get below 2600 with any strength suggesting that something negative has to occur from the selling to be successful. The index finds itself in the middle of the recent trading range between 2753 and 2557 and with most of the news from Europe already out, the probability of the index trading in that range for the rest of the year is high. Evidently, any move above or below those 2 levels will generate additional movement of consequence.

SPX Friday closing price - 1263

The SPX had an inside week (lower highs and higher lows) leaving the index in no man's land without any strong clue as to what to expect. In addition, the index closed right in the middle of an important daily and weekly close area between 1256 and 1263, also suggesting that some additional fundamental stimulus is needed to generate movement in one direction of the other.

The SPX also shows a bullish flag formation in which a break above the top of the flag at 1292 would give an objective of 1433. Nonetheless, fundamentally that does not seem like a possible objective inasmuch as the world's financial problems continue to be almost insurmountable and rallying above all the resistance generated over the past 3 years seems unlikely to occur without some major positive changes occurring.

On a weekly closing basis, resistance is minor to perhaps decent at 1285/1288, and then nothing until decent resistance is reached at 1343/1345. Above that level, strong resistance is found at 1363. On a daily closing basis, resistance is minor to decent at 1275 and decent at 1285. Above that level, resistance is decent at 1343/1345, and strong between 1353 and 1363. On a weekly closing basis, support is minor to decent at 1253 and minor at 1239. Strong support is found between 1123 and 1131. On a daily closing basis, support is minor to decent at 1229 and decent at 1218. Below that level, there is some minor support at 1200 and then nothing of consequence until the low 1100's are reached.

Like with the other indexes, the SPX is in a trading range between 1215 and 1292 that has little meaning. Nonetheless, a break above or below either one of those levels would likely be indicative of further action of consequence in that direction. With most of the good news from Europe already in the market, and the index closing at 1263, it seems unlikely that the recent high at 1292 will be broken unless further good news comes out (unlikely). By the same token, the support down in the 1218-1229 level has shown to be strong and it is just as unlikely to get broken unless some problems arise in Europe with the banks and the defaults.

The recent high at 1275 is particularly important this week as breaking that level would not only generate new buying but also cause a break above the 200-day MA, which is currently at 1272. Such a break would likely bring in additional buying, a break above the recent high at 1292, and a rally up to the next resistance level of consequence up at 1335/1345. By the same token, a red close on Monday would be seen as a negative as the index did close on the highs of the day on Friday but below the 200-day MA and a red close would give one more successful retest of that line, suggesting that further upside would not occur. As such, Monday's close is likely to be very important to this index.

To the downside, no negatives will be stimulated unless the index breaks Wednesday's low at 1226. A break of that level would likely turn the traders negative on the chart. Though such a small trading range between 1275 and 1226 is unlikely to be seen for the rest of the year, without any further fundamental news such a trading range looks possible.

The end of the year period between November and December generally is positive for the indexes as seasonal tendencies tend to generate rallies during this period of time. Because of that, and because some of the recent problems in Europe seem to be getting addressed, traders are in a buying mode. Nonetheless, addressing the problems in Europe and solving them are two entirely different things and those fears will continue to haunt traders and investors likely preventing the strong buying that is needed to generate further upside of consequence.

On the other side of the coin, if the pitfalls that are feared in Europe are postponed until the start of the New Year, such as waiting for new elections in Italy as well as in Greece, it is unlikely the bears could generate strong movement to the downside as well. This scenario then suggests that the probabilities favor the indexes getting into a trading range for the next 7 weeks and leaving major decisions to be made until the start of the New Year.

With many of the immediate fears addressed, traders are likely to get back to technical trading making decisions on Chart factors and not, as has been the case during the past 16 weeks, on greed and fear. As such, this coming week is likely to be very important as there are many chart factors in play that would likely push traders in one direction or the other, or to no direction of consequence during the rest of the year.