DOW Friday closing price - 12019

After a concerted and unexpected infusion of capital by world powers this past week, the DOW generated the strongest weekly move up in 3 years and the 3rd strongest weekly rally ever. The rally was additionally fueled by a much oversold market that showed little resistance above, thus creating an environment where panic short-covering was seen. The news was considered a fundamental development that could end up being a game changer, inasmuch as previous to this event no concerted and unified action by so many countries had ever been seen.

Nonetheless, the DOW did not accomplish anything of consequence on the charts as the index was unable to get above the first decent resistance level found at 12187, having moved up to 12146 but backing off to close 125 points lower in the 12,000 demilitarized zone. Such action has raised questions as to whether further upside will occur as the actions seen this past week, by the powers-that-be, can be considered "the whole ball of wax" as far as what can be done fundamentally to relieve some of the financial ills being felt world-wide.

On a weekly closing basis, resistance is very minor at 12153 and decent at 12231. Above that level, there is minor resistance at 12391, minor to decent at 12681 and strong at 12810. On a daily closing basis, resistance is very minor at 12045, and decent between 12153 and 12231. Above that level, there is decent resistance at 12391 and then nothing of consequence until decent resistance is found at 12724. Strong resistance is found at 12810. On a weekly closing basis, support is decent at 11231, minor at 10992 and decent between 10817 and 10771. On a daily closing basis, support is minor at 11780, decent at 11613 and decent again at 11231.

The DOW was able to close out the week above both the 200-day MA, and the 50-week MA, both currently right around 11940, and that has to be considered a positive as both of those MA's carry a lot of weight with the traders. By the same token, the index closed above the 200-day MA on Wednesday but did not generate any follow through to the upside the rest of the week in spite of the fact that both the ISM Index and Jobs reports on Thursday and Friday were better than expected. The failure to get above the resistance levels mentioned above, plus the lack of any follow through of consequence to the break of the MA line, raises questions whether further upside will be seen. The lack of follow through the last 2 days of the week suggests the traders are waiting for some other news to come out or for a further commitment to be made by the traders themselves before deciding what further direction the index will take for the month of December.

The probabilities favor the upside if for no other reason than the DOW generated a strong spike up and a close near the highs of the week and the month, suggesting from a purely technical perspective that further upside should be seen this coming week. Nonetheless, the same thing happened at the end of October with a close near the highs of the week and the month the last week of October and yet no follow through to the upside was seen in November. With the index failing to get above November's high in the first 2 days of December, in spite of good news on Thursday and Friday, the door has been left wide open for the same thing to be repeated in December. This could even be a more likely scenario because of the low participation that is generally seen at the end of the year making it less likely that buying of consequence will appear the rest of the month if it did not appear at the end of last week.

It is likely that something will be decided on this issue at the beginning of the week inasmuch as the traders are not likely to wait much more before they begin bailing out on what is generally considered to be a slow month anyhow. There is little economic news of consequence due out next week and the bulls will not continue to try to push the index upwards, after such a strong rally last week, if no immediate follow through is seen. If that does happen, the probabilities will increase that December will be another inside month, as November was, and that the traders will simply wait until the earnings and economic reports come out in January.

The key is likely to be the 200-day MA at 11945. Based on the sell-off and lack of interest in buying seen the last few hours of trading on Friday, the probabilities favor the DOW heading back down to the line on Monday to retest it. If the retest is successful (no break of the line on a closing basis) and the bulls are able to generate a green close on Tuesday, the traders will likely get back on to the bull side and new highs would likely be made by Wednesday. By the same token, if the index closes below the 200-day MA on Monday and the break is confirmed on Tuesday, the bears will climb aboard.

To the upside, the DOW shows decent resistance at 12187, minor to decent at 12284 and then nothing until minor to decent resistance is found again between 12391 and 12450. To the downside, the index shows no support of consequence until the 11555/11630 level is reached. Last month's low was 11231 and last month's high was 12187. If the index fails to break either of those levels this week, the probabilities will increase that another inside month will occur with Friday's high at 12146 being the high for the month and the 11555 becoming the downside objective for the next 4 weeks, making that the high and the low for the month.

NASDAQ Friday closing price - 2626

The NASDAQ generated all kinds of bullish signs this past week with a breakaway/runaway gap formation as well as a potential "island" gap formation showing a gap down and a gap up during the last 2 weeks. Such chart action should have been sufficient to "blow the top off" the charts. Nonetheless, when "push came to shove" the bulls failed to deliver the "punch line" having closed out the week just a few points above the 2616/2622 area that has been such a pivot point throughout the last 5 months. The close failed to confirm the strength seen throughout the week, leaving the door open for the bears to come in and push the index down if no further follow through to the upside is seen this coming week.

The NASDAQ also failed to get up to the 200-day and 50-week MA's, both currently between 2674 and 2683 respectively, and did generate a spike up on Friday that failed to stimulate any new buying causing the index to come back down at the end of the day to close within a cat's whisker of being a negative reversal day closing out the day in the green (by less than 1 point) but near the lows of the day. The failure to get up to the MA's lines after such a bullish run as well as the spike-type action seen Friday with a close near the lows of the day are signs of an index that is having trouble generating new buying at these levels.

On a weekly closing basis, resistance is decent at 2737, minor at 2833 and 2854, and strong at 2873. On a daily closing basis, resistance is minor to decent at 2667, decent at 2687, and strong between 2727 and 2738. On a weekly closing basis, support is decent at 2441 and at 2415 and strong at 2341. On a daily closing basis, support is decent between 2598 and 2616, minor at 2587 and then nothing until decent support is found between 2441 and 2455. Below that level, strong support is found between 2335 and 2341.

The NASDAQ does show a breakaway gap between 2477 and 2507 and a runaway gap between 2542 and 2582 that are considered to be bullish indicators or an uptrend beginning. The runaway gap is particularly strong because it came exactly at the 50 and 100 day MA's both at 2482/2485 last Wednesday. From a purely chart formation point of view, the gap formation fulfills all the requirements of a bullish event and therefore the probabilities suggest that further upside will be seen. The only question being asked is "why did the index fail to reach the 200-day MA at 2674 when there was no resistance of consequence at the week's high of 2659". With the momentum and news totally on the bullish side the index should have gone up to the 200-day MA line and then perhaps sold off to retest the runaway gap. That is a question that is probably haunting the bulls at this time.

It is now likely, with the close near the lows of the day on Friday, that the NASDAQ will be testing the runaway gap and the MA lines, now both at 2487, at the beginning of the week. What the index does there will likely determine the action the traders will take the rest of the month as any failure at this time (holiday month) will likely cause the traders to liquidate their long positions and go to the sidelines. Any drop down to 2542 will likely cause a further drop to close the breakaway gap at 2477 and put the index right back into a sideways to slightly bearish trend.

To the upside the chart is quite clear as the 200-day MA at 2674, on a daily closing basis, is the resistance the bulls must conquer to keep the strong rally seen this past week moving forward. Decent resistance intra-week is found up at 2695/2703 and if the bulls can accomplish both of these requirements the index will likely attempt to get up to the year's highs at 2887 before the end of the year and put itself in a position to resume the uptrend it was in at the beginning of the year.

Like with the DOW, the NASDAQ also had an inside month in November after a strong October. Last month's high was 2730 and last month's low was 2441. Based on the action seen at the beginning of December (Thursday and Friday of last week), the probabilities seem to suggest that another inside month could be seen with 2500 possibly being the low and 2695 being the high.

What the NASDAQ does at the beginning of this coming week will likely be indicative of what it will do the rest of the month.

SPX Friday closing price - 1244

The SPX, like the other indexes, had a strong week having rallied 102 points (9% increase) during the last 5 days. The rally was the 4th strongest weekly rally ever, only to be compared to the 1-week rallies seen during the collapse of the market in 2008. The news that came out this week was particularly beneficial to this index, inasmuch as it was tailored to help the financial community world-wide. In addition, financial stocks had been battered down substantially during the past few months putting those stocks in strongly oversold conditions and ripe for a strong rally.

Nonetheless, it should be mentioned that after the initial strong rally on Wednesday the index generated 2 red closes on Thursday and Friday and that chart event has to worry the bulls inasmuch as both technically and fundamentally it should not have occurred. Further intra-day red should be seen on Monday as the SPX did close on the lows of the day on Friday and further downside should be seen. The problem the bulls have in that respect is that unlike the other 2 indexes that show decent support nearby, the SPX shows no support nearby and is open to technical selling, more so than the other indexes.

On a weekly closing basis, resistance is minor to decent at 1268 and decent at 1285. Above that level, resistance is decent at 1343 and strong at 1363. On a daily closing basis, resistance is very minor at 1246 and decent at 1263. Above that level, resistance is strong at 1285 and then nothing until minor resistance is found at 1335. On a weekly closing basis, support is decent at 1158 and at 1131 and decent to strong at 1123. On a daily closing basis, support is minor at 1229 and minor to decent between 1212 and 1218. Below that, no support is found until decent support at 1158.

The SPX will likely be a key index this week inasmuch as the positive news that generated the rally this week was tailored mostly to the financial community. If the news is truly going to help the banks in Europe survive there doesn't seem to be many fundamental reasons for the index to stop at these levels and fall back. Nonetheless, the index did generate 2 red closes at the end of the week and more importantly did it at a level (1256) that has been an important pivot point all year. If the index is unable to close above what is considered a minor resistance level (a previous low close), it should be considered a sign that the fundamental action taken by the powers-that-be is not all that impressive or a game-changing as some analysts have stated.

Additionally, the SPX does have one chart problem and that is the fact that no support of consequence is found until the 1218 level is reached. A drop down to that level will take away the possibility of the spike rally seen this past week being a flagpole of a bullish flag formation, suggesting the is 1218 is seen that the rally was mostly bogus.

The 200-day MA, currently at 1264 has to be considered important as a close above that level would suggest further upside and a good possibility that the 4-month high at 1285 will be broken. With no resistance above 1285 until 1335 is reached, a close above 1264 could actually be the catalyst of an additional 100 point move to the upside over the next few weeks.

The chart does suggest that if there is any weakness seen on Monday that the SPX will be heading down to the 1218 daily close support area and the 1210/1212 intra-day support shown by the 50 and 100 day MA's. Any close below 1210 will likely bring in renewed selling and a drop back down to the 1158 level where the index closed the previous week.

There are still a lot of questions being asked regarding the infusion of capital by so many world powers, inasmuch as it shows that the problem is bad enough to warrant such action. In addition, the infusion of capital will not relieve the debt load by the nations that are on the verge of default, or help the consumers to increase their desire to purchase more, which in turn would help relieve some of the threats of a world recession. As such, it was evident by the inability of the indexes to get above their individual resistance levels this past week that traders are not yet convinced the action will have the kind of success that will help "turn the corner" on the problems.

There are no economic reports of consequence due out this week and with the holiday period and end of the year book squaring just a few weeks away the probabilities favor the traders pulling back rather than being aggressive. The first few weeks of January will be very important not only because the earnings reports quarter will once again be in play but also because the economic reports on the wild last quarter will be available. In addition, the Retail Sales numbers this coming month will be carefully scrutinized based on the fact that the initial numbers suggest a record breaking month of consumer purchasing. Confirmation of that even would tend to generate new buying at the beginning of the year.

Probabilities favor a calm December but this last quarter of the year has been anything but "normal" with record setting rallies, unexpected falls in price and the kind of two-way volatility that is normally seen at major tops and not major bottoms. Having seen all of that in the last 2 months, it is impossible to say at this time that December will be calm. By the same token, with no major news expected the rest of the month and the opposing forces (bulls and bears) seemingly evenly matched, it is unlikely that either will have a major edge in December and that everyone will simply table their actions until the beginning of the year.