DOW Friday closing price - 12184

The news from Europe is finally out and the response was generally positive, though not overwhelmingly so. The DOW was able to generate a higher weekly close as well as a close near the highs of the week suggesting that further upside is likely to be seen as there are no negatives expected to come out over the weekend. The index ended up having the smallest trading range in 5 months and that implies that the rest of the month will be same with small trading ranges and nothing of great consequence occurring. By the same token, with the reaction to the news being generally positive, the Xmas rally is likely to continue for the next couple of weeks, though likely in a limited fashion. This is actually a return to normalcy as December by nature is a month where participation is low and movement is limited.

The DOW did confirm the breakout above the 200-day MA seen a week ago with a drop back down near the line on Thursday and a green close on Friday. The successful retest is likely to add technical ammunition to the bulls with which to break above the 5-month daily and weekly closing high at 12231 and keep the possibility open of the index renewing the 3-year uptrend in January when the next set of important economic and earnings reports come out. The 12231 level of resistance is only a minor to decent resistance level and breaking above it would not be considered a renewal of the long-term uptrend but simply a renewal of the "short-term" uptrend that started 10 weeks ago.

On a weekly closing basis, resistance is minor to 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 decent between 12196 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 minor between 11858 and 11983. Below that level, there is decent support at 11231, minor at 10992 and decent between 10817 and 10771. On a daily closing basis, support is minor to decent at 11997 minor at 11780, decent at 11613 and decent again at 11231.

The chart of the DOW is now set for further upside this coming week. Support will now be decent and important at the 12000 demilitarized zone (11970-12030) and should not be broken for the rest of the month. The mood is now "cautiously" optimistic and unless there is some bad news that comes out over the next 4 weeks the bulls will likely be successful in defending that area because of the chart action seen this past week.

To the upside the DOW will encounter resistance on a daily closing basis at 12231 (12284 on an intra-week basis) and then again of a bit more consequence at 12391/12426 (12393-12450 on an intra-week basis). The resistance at 12231 is recent in nature and set mainly because of news that came out the day after that high was generated. As such, the resistance there is not likely to offer much strength as the news has changed and the reasons that level became resistance have been negated. Nonetheless, that is not the case with the resistance up between 12391/12426 as that resistance was set in February and April and retested to the downside in May and July (before any of these European woes became a major problem) and therefore of much more consequence chart-wise.

It is likely that the DOW will break the 12284 resistance and move up to the 12391 area this coming week. The index did close near the highs of the week and the highs of the day on Friday and further upside is expected on Monday. The intra-day 60-minute chart does show support at 12105 from the 50 60-minute MA and with the index having had a 291 point trading range last week it is entirely possible that the trading range for this week could be something like 12105 to 12393. As the month progresses, though, the trading ranges are likely to shrink even more and though upward movement up to 12450 and perhaps even slightly higher could be seen, the participation of the traders will diminish making any major moves unlikely to be seen. As it is, the traders are likely to wait for the earnings reports that start the second week of January before making any bold moves again.

There are a couple of other scenarios that are possible and bear mentioning them. To the downside if the demilitarized zone is broken the DOW could drop all the way down to 11862 where support is decent. A drop down to that level will only be seen if there is any negative news that comes out but technically speaking such a drop is possible. To the upside, a rally up to 12590 can also be seen as there is a 3-point trend-line that connects at that level. The 3-point trend-line is made by connecting the high seen in Oct07 with the highs seen in April and July of this year. Anytime you have 3 highs of consequence that connect it is a valid trendline that will be difficult to break. As such, there is a possibility of the index getting up as high as 12590 before the end of this month.

Either way, the probabilities are very high that December will be a month to forget. The bias should be to the upside but then again in a limited way since the agreement made in Europe, though positive, has a lot of holes in it and several nations chose not to participate. It will give support to the DOW but not much impetus to go substantially higher.

NASDAQ Friday closing price - 2646

The NASDAQ hesitantly confirmed that last week's close above the important 2616/2622 weekly close area of resistance was successful. The confirmation did not come until the last hour of the day on Friday but suggests that the index will be heading higher next week, though the upside is as limited as what is being seen in the DOW with decent resistance levels above.

The NASDAQ has lost the leadership role that it maintained for the first 2 years of the rally from the recession lows seen in 2009 and that is an overall negative that did not go away this week in spite of what should be considered a mini breakout in the index market. The lack of leadership over the past few weeks, and more importantly this past week, suggests that the rally right now is likely to be more seasonal than anything and that the market will still depend on the economic and earnings reports that come out on January for further direction of consequence.

On a weekly closing basis, resistance is minor to decent at 2706/2707, decent at 2737, minor at 2833 and 2854, and strong at 2873. On a daily closing basis, resistance is minor at 2655, 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 had an eventful week this past week when the index tested successfully the 2596/2616 support level with a close at 2592 on Thursday and a green close above that level on Friday. The 2596/2616 area has been very important and meaningful all year and the fact that it was once again tested successfully suggests the index will not go below that level for the rest of this year. On the other side of the coin, the NASDAQ did not accomplish much to the upside as the index was unable to close above the 50-week MA, currently at 2680 or the 200-day MA, currently at 2670 and both of those factors also suggest that neither the bulls nor the bears have any great edge at this time.

The support level in the NASDAQ down around 2600, though, does seem to have a bit more strength that the MA's resistance levels above, meaning that the probabilities slightly favor further upside during the next few weeks. Nonetheless, the recent October high at 2753 (2737 on a weekly closing basis) is less likely to get broken than the DOW's 12284 (12231 on a weekly closing basis) as the index has resistance from Oct07 up between 2727 and 2734, likely meaning that the DOW will continue to outperform the NASDAQ for the next few weeks.

The NASDAQ did close near the highs of the weeks and on the highs of the day on Friday and further upside should be seen on Monday with the 200-day MA at 2670, or even the 50-week MA at 2680, likely to be seen that day. If that happens and the index closes above the 200-day MA, further upside is likely to be seen with the 2706/2707 being the objective for the week. The upside objective for the month is likely to be no more than 2737 and even getting that high will be difficult as the 2724/2734 level could be the stopper. The DOW has consistently outperformed the NASDAQ during the past 4 weeks and I see no reason for that to change in the next 4 weeks.

Though the bias should continue to favor the bulls, it is unlikely that the NASDAQ will have a "great shakes" performance in December with the index probably trading in about a 100-130 point trading range between 2600 to 2730 as the traders await all the earnings and economic news due to come out at the beginning of the year.

SPX Friday closing price - 1255

The SPX, like the NAZDAQ, had a positive week but was unable to close above the 200-day MA at 1263 or the 50-week MA at 1269, suggesting that further upside will be seen but not of any great consequence. The news from Europe should have been of great impact to the financial stocks in the index (GS, JPM, etc) but in reality those stocks did not outpace the market in any great way suggesting that the steps taken by the ECB in Europe are not considered strong enough to turn the long-term outlook around very much.

The SPX has not yet accomplished negating the break of the strong support from the first 6 months of the year at 1268 (based on a weekly close) and that still has to be considered a negative, especially when the other 2 indexes have accomplished negating that break themselves. As such, the traders are likely to be supportive during the next few weeks but not in a way that would be indicative of a longer term positive outlook.

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 minor between 1261 and 1263, minor at 1275 and decent to strong at 1285. Above that level, no resistance is found until decent resistance 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 1234 and at 1229 and minor to decent between 1212 and 1218. Below that, no support is found until decent support at 1158.

Most of the questions being asked for the past several weeks regarding the Europe financial debacle were answered this past week. The answers were not what a lot of the bulls were hoping to see but good enough for a temporary patch-job to hold the market from heading lower immediately. The seasonal Xmas rally is now back on the schedule and for the next couple of weeks further upside is expected, though limited in nature by the lack of trader participation in the holiday period as well as the underwhelming commitment seen in Europe to the rescue package.

Nonetheless, there are few reasons at this moment to be an aggressive bear inasmuch as the U.S. economic reports continue to show that the economy is growing (albeit at a slow pace) and that the prospects for January's economic and earnings reports growth remain positive. With no major reports due out for the next couple of weeks that would contradict such a scenario, the probabilities favor a slight bias to the upside until the first couple of weeks in January.