DOW Friday closing price - 11796

The DOW gave a failure to follow through signal on the weekly chart when the index closed below the previous weekly low close that had been in place the first 6 months of the year at 11858. The failure to follow through signal is a strong sign that the index is at best in a sideways trend and that the high weekly close seen 4 weeks ago at 12231 is not likely to get broken the rest of the year. This occurrence has to be particularly worrisome to the bulls as the index had a powerful positive monthly reversal in October that promised higher highs in November, especially when considering the index closed on the highs of the month last month, and the fact that it did not occur suggests that the fundamental problems besetting the market are extremely serious and that the traders do not feel they will be resolved in a positive manner.

The negative omen in the DOW is even further supported by the fact that the index has a strong seasonal tendency (10 out of the last 13 years) to rally the last 3 months of the year generating higher highs than the previous month each month from October through December. It is now highly unlikely to occur this month as the index would have to rally over 600 points next week to accomplish that feat, and with this coming week being a shortened holiday week with few important economic reports the probabilities are significantly low that it will happen. It should also be mentioned that the problems besetting the bulls (Europe's Euro and default worries) are not likely to get addressed fully until the New Year, likely causing December to follow November's suit and keep the index from fulfilling the seasonal tendency to close December on a high note.

On a weekly closing basis, resistance is minor at 12153 and decent at 12231. On a daily closing basis, resistance is minor to decent between 12153 and 12170 and decent between 12231 and 12258. On a weekly closing basis, support is minor at 11509, minor again at 11228, and minor to decent at 11100. On a daily closing basis, support is minor at 11770/11780, decent to perhaps strong between 11613 and 11654, and then nothing of consequence until the 10700 level.

The DOW is not likely to sell off aggressively either as the weekly chart continues to show a bullish flag that has not yet been negated. It is possible and maybe even probable that the traders will simply "tread water" for the next 7 weeks waiting for the New Year to bring some clarification of what is to happen. By the same token, this is a chart situation that has not been seen before starting with the fact that October was the biggest monthly rally "ever seen" but November has been the biggest "fizzle" ever seen as well. Such a set of events defies any evaluation based on past history of the index.

The parameters of the flag formation in the DOW are clear, though, as a break above 12284 or a break below 11555 will give a clearer picture of what will happen from here on in. Nonetheless, the chart (as well as the fundamental picture) suggests that the index is likely going to trade in that 729 point area for the next 7 weeks. This idea certainly fits in with what is normally seen almost every year in December where trading decreases substantially due to the holiday period as well as closure of positions to year-end book squaring. In addition, with the probability that details of the rescue package in Europe will not be known until the New Year, there will be few catalysts in December that will move the market substantially.

Nonetheless, the DOW did have a strong negative week with a close near the lows of the week suggesting that the bottom of the flag formation (11550-11630) will be tested this coming week and in doing so that some short-term decisions for the next few weeks will be made. On Thursday the index did get down to the 100-day MA, currently at 11665, and was able to bounce off of that. The index did not bounce off of that very much on Friday suggesting that if there is no new positive news over the weekend that the line will be tested once more. With the inability of the bulls to generate any buying of consequence the last 3 days of the week the probabilities favor the line being tested again. Below the 100-day MA, there are 3 additional areas of support that are important starting with the low seen the first week of November at 11630 as well as the major low seen in March at 11555. In addition, the always important 50-day MA is currently at 11530 and moving up, suggesting that even if the bears are successful in breaking the other 2 supports that the 11555 level will be a tough nut to crack without more fundamental negatives.

To the upside, the 200-day MA, currently at 11975, will continue to be a strong resistance level (on a daily closing basis) now that the break below that line has been confirmed with 3 days in a row closing below it. Nonetheless, on an intra-day basis, there is no resistance of consequence until Tuesday's high at 12165 is reached. On a very sensitive basis, and using the 60-minute MA, the DOW does show resistance at 11830 that if broken would likely push the index up to the 200-day MA.

The bulls did show an inability to rally the index even on an intra-day basis during the last 3 days of the week and it is unlikely that will change this coming week. As such, selling pressure should be seen from the get-go on Monday taking the index down to the support levels mentioned above. It is likely that with the traders likely taking the rest of the week off starting Wednesday that most of the action for the week will be seen Monday or Tuesday. If by any chance the bears are able to get the DOW to break below the 11555 level, drops down to at least the 11258 would likely be seen. The probabilities of that happening are low, but it is good to know that between 11555 and 11258 there is little to stop the index from falling.

Probabilities favor very slow trading this week with 11555-11630 being the low for the week and 11975 being the high for the week.

NASDAQ Friday closing price - 2572

The NASDAQ had the most negative week of all the indexes having closed below the previous major support and pivot point level at 2600 (2616 on a weekly closing basis), unlike the DOW that still finds itself 246 points above its same level. With the index having been the leader to the upside for the last 3 years the turnaround and failure to follow through signal given this past week strongly suggests that the long-term bullish outlook for the market has begun to change and that the traders fear that it will not be a short-term situation.

The NASDAQ also had a bullish flag formation but the action this week has almost made the formation disappear and if the index is able to get below 2557 the formation will be negated totally. In addition, a drop below 2557, which is only 15 points below Friday's close, would generate a sell signal of consequence on the daily chart suggesting that a drop all the way down to 2400 would occur as there is no support of consequence until that level is reached, and even then the support at 2400 is minor in nature. Considering the action seen and the probabilities of further downside being seen this coming week, the index could be the first to generate the kind of technical sell signal that would bring a lot of fear into the hearts of the bulls.

On a weekly closing basis, resistance is minor to decent between 2616 and 2622, very minor at 2685 and decent at 2737. On a daily closing basis, resistance is minor to decent between 2616 and 2622, minor to decent again at 26.85 and decent to strong between 2727 and 2737. On a weekly closing basis, support is minor at 2500, minor to decent at 2415 and decent at 2341. On a daily closing basis, support is minor to decent between 2455 and 2473, and decent to strong between 2335 and 2341.

The NASDAQ broke some very important daily and weekly chart levels this past week as well as breaking all the daily MA's lines (50, 100, and 200. The index finds itself in an area where the "only" support close by that is left is at 2557. A break of that level would likely take the index all the way down to the next support level between 2414 and 2420, which is only considered to be minor. The index closed on its lows of the week and only 15 points from the 2557 support suggesting strongly that further downside is to be expected this coming week. If the index does break the 2557 support the index will likely drop an additional 140 points as there is no support built between those 2 levels. In addition, the index is showing an open gap between 2512 and 2519 that based on the negative action seen this past week has now become an attractive and likely to be achieved magnet location. With lower participation expected this coming week if the bears set their minds to it they could do some damage as computer selling will kick in if those levels of support are broken.

To the upside, the bulls desperately need to generate a close above the 50-day MA, currently at 2595, as well as a close above the 2616 daily close level that has been so important and pivotal for the past year. In addition, if the bulls have any hope of generating the seasonal end of the year rally they need to close the NASDAQ above the 200-day MA, currently at 2685. The 200-day MA is always important and more so since the index has traded 13 times up to and above that line in the last 20 days, accomplishing a close above the line only 3 times. If the bulls want to stimulate new buying, closing above that line convincingly is paramount.

Probabilities favor the downside if for no other reason than the bulls failed this past week to generate any rallies in spite of some decent economic news. In addition, the fundamental news from Europe with the Italian Bonds continuing to trade at the 7% level and above is keeping the traders bearish as those kinds of rates, if they stay like that, will make a recovery in Italy insurmountable. As such, the probabilities definitely favor the bears this week. Will the low volume and lack of participation be enough to prevent the NASDAQ from breaking? Stay tuned to Monday's action.

SPX Friday closing price - 1215

The SPX continues to be in a bearish chart pattern inasmuch as the index, unlike the others, did not negate the downtrend a few weeks when the market rallied. Nonetheless, just like the DOW, the index continues to show a possible bullish flag formation on the weekly chart that has not been negated yet, though Friday's close put the index in a position for that to be negated if any further downside is seen this coming week.

The SPX managed to close exactly at the previous high weekly close of consequence just prior to this 7-week rally at 1215 and just a few points above in intra-week level of support that includes the 100-week MA at 1200. Any intra-week break below 1200 will likely set up a domino-like fall back down to the 200-week MA, currently at 1135, and perhaps as low as the 1100 area where support of consequence is found.

On a weekly closing basis, resistance is minor 1263 and decent at 1285/1288. On a daily closing basis, resistance is minor at 1254, minor again at 1263 and decent at 1275 and at 1285. On a weekly closing basis, support is very minor at 1189 and decent to strong between 1123 and 1131. On a daily closing basis, support is minor between 1200 and 1204 and then nothing until minor support is again reached at 1129. Below that level decent support is found at 1119 and strong support at 1099.

The SPX continues to be the weak sister in the index trio inasmuch the problems that are worrying the market are directly related to fiscal issues in Europe. By the same token, that problem is being addressed by the European community and until further information is made available regarding the details of how the Europeans will solve the issue the index will remain weak.

The 1200 area in the SPX has proven itself to be a strong pivot point over the past 3 months as the index has found itself generating 15 low or high closes between 1198 and 1224 during that period of time. Half of the 3 months in question the index traded above and half of the time below that level, suggesting the where the index closes this coming week (above or below 1200) could determine what the index will do the next 6 weeks after that. The 50-day MA is currently at 1206 and the 100-day MA is currently at 1224 and the SPX closed right in the middle of those 2 lines on Friday suggesting that the MA's could also help determine short-term direction.

The SPX did close on the lows of the day and the week on Friday and further downside is likely to be seen. Nonetheless, the index does have between 16 and 18 points that it can still drop intra-week before the bears can claim success. As such, what the index does this week will be important. Probabilities favor the downside if for no other reason than the fact that nothing fundamentally positive is likely to occur over the next 4 trading days. Nonetheless, any daily close above 1224 will relieve quite a bit of the selling pressure.

All kinds of failure signals were given this past week and most importantly there was not one single event that can be pointed to as being the culprit. Simply stated, the bullish mood that was in place up to a couple of weeks ago has disappeared and been replaced with a strong sense of dread that Europe will not be able to solve their problems and that things will continue to unravel. In addition, the end of the year rally that has been so prevalent in the past and seemed to be running full force in an extraordinary way with October's rally has run into a brick wall putting the indexes into unknown territory where traders will be unable to use history as a guide as to what to do. Such a situation has thrown technical confusion into the minds of traders that threatens to provide major surprises going into year's end.

On the other side of the coin, the extraordinary rally seen in October as well as the extraordinary fizzle seen in November could have put both forces (bull and bear) on an even playground awaiting the fundamental information that will become available on the New Year, such as the details of the European Rescue as well as the first quarter earnings results. Such a scenario would tend to offset itself and cause the indexes to trade in a small trading range and sideways.

With the holiday season around the corner probabilities favor traders taking off and leaving everything as-is until after the holidays are over. Nonetheless, this year general trading practices have not been dependable and no one knows at this time what will happen. By the same token, based on the action seen this past week, the traders will likely use the action this week to decide what will likely happen in December. As such, the probabilities are high that if something out of the ordinary is to happen, that it will happen this coming week.