DOW Friday closing price - 11866

The strong rally that started 3 weeks ago in the DOW has come to an abrupt end as the agreement in Europe that was announced a week ago Friday was found to be insufficient to support the kind of recovery that is needed. Disappointment was felt from the start of trading last Monday, causing the index to generate 4 red closes this past week and in the process breaking and closing below both the 50-week and 200-day MA, indicators that are strongly influence technical trading mentality.

The DOW is now showing 4 failure signals over the past 7 weeks having closed up between 12153 and 12196 4 times without once being able to close above the October 28th high close at 12231. From a purely technical perspective this area now has to be considered strong resistance and likely unable to get broken without some "major" positive piece of fundamental news.

On a weekly closing basis, resistance is minor to decent at 12184 and decent at 12231. On a daily closing basis, resistance is decent between 12196 and 12231. On a weekly closing basis, support is minor at 11858 and decent at 11231. On a daily closing basis, support is very minor at 11823, minor at 11780, decent at 11613 and decent again at 11231.

The DOW had been showing a bullish flag formation on the chart at the end of the previous week but by Wednesday that flag formation was negated when the index went and closed below the 200-day MA, currently at 11945. The failure was confirmed again on Thursday and Friday with 2 subsequent closes below that line and now the chart seems to be poised for further downside this coming week. The bulls are hoping the lack of participation during the Xmas holiday period will keep the selling to a minimum, at least until the first couple of weeks of January when the earnings reports start coming out, which are expected to be positive for U.S. Stocks.

The DOW was able to hold itself above the 50-day MA, currently at 11810, the last 3 days of the week but did close on Friday near the lows of the day and the week and unless something fundamentally positive happens over the weekend the probabilities seem to favor a break of the line and further downside to either the strong intra-week support from March at 11555 or the minor to decent intra-week support from November 1st at 11630. On a daily closing basis, support is strong at 11613.

To the upside, the DOW will face decent resistance on a daily closing basis at the 200-day MA, currently at 11945 (11965 on an intra-week basis). Nonetheless, if the index is able to get above Thursday's high at 11965, there is little resistance found until 12187 is reached.

The probabilities favor the DOW heading lower as the news from Europe continues to be mostly negative and traders are likely to be liquidating their long-term positions, book squaring for the year, and waiting for the New Year before making any new evaluations of where the index is headed. By the same token, with a slew of economic and earnings reports due out at the beginning of the year, which are already anticipated that they will be better than expected, the selling is likely to be muted until that period arrives.

The DOW is likely to trade between 11630 and 11970 for the next couple of weeks with a possible extended high as much as 12187 if there is no more negative news from Europe. Nonetheless, the downside is likely to be seen first.

NASDAQ Friday closing price - 2555

The NASDAQ gave another failure signal closing below the important 2600 level on Friday. Nonetheless, on the weekly closing chart, the index has now traded between the 50 and 100 week MA's, currently at 2575 and 2515 respectively, for the last 10 weeks with one exception to the upside and one exception to the downside. The one exception low outside of the MA's trading range was seen 4 weeks ago at 2441 (closing at that same price) and the probabilities suggest that a move down toward that low will be seen this coming week. Nonetheless, breaking below the 100-week MA intra-week has not been difficult to accomplish as the index has accomplished that on 9 out of the lasts 19 weeks. As such, probabilities do favor that happening again this coming week.

The NASDAQ did close the runaway gap between 2542 and 2588 on Wednesday and now has the breakaway gap between 2477 and 2507 that beckons strongly, especially since the index shows a spike on Friday and a close near the lows of the day suggesting that Friday's rally will be difficult to get above without some fundamental help. The index was not able to accomplish anything of consequence 3 weeks ago when the Europeans agreement was announced and now that a failure signal has been generated, the probabilities favor further weakness and closure of that bullish gap formation.

On a weekly closing basis, resistance is decent at 2646, minor to decent at 2706/2707, and decent to strong at 2737. On a daily closing basis, resistance is minor to decent at 2622, 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 minor at 2539 and then nothing until decent support is found between 2441 and 2455. Below that level, strong support is found between 2335 and 2341.

On a weekly closing basis, the 100-week MA has not been as strong a support as the 50-week MA has been resistance. The NASDAQ has closed below the 100-week MA, currently at 2520, on 3 occasions over the past 4 months and the fact the index closed on the lows of the week and that further downside is likely to be seen suggests that a 4th close below the line will occur this coming week. Nonetheless, it should be mentioned that each close below the line has resulted in an immediate move up and close above the line the following week and there is no technical or fundamental reason to believe that won't happen again, at least not until the New Years reports start coming out.

To the upside, the NASDAQ has decent resistance at the 50-day MA, currently at 2615, and then nothing until the 50 week and 200-day MA's, both currently at 2675. The resistance at 2615 is not likely to get broken without some good news and the resistance at 2675 is not likely to get broken unless there is a strong fundamental change and the uptrend resumes.

To the downside, the NASDAQ has some minor support at 2525, which was the low seen last Wednesday, decent support at the decent low seen the last week of November at 2441, and then nothing of consequence until the 2331 low seen is August is reached. The 2525 support could easily be broken if there is any follow through selling to the weakness seen at the end of the week, nonetheless, the 2441 level is not likely to get broken the rest of the year as that level represents where the index was "before" the European agreement was announced. The European agreement, though not as good as it was expected to be, should offer enough buying support to hold the index above that level until the next set of economic and earnings reports come out. The 2331 level is not likely to get broken, or even seen, unless something turns move negative that it was been up to now.

The NASDAQ did close near the lows of the week and with such a gloomy outlook for the near future as well as a bullish gap formation that now has a high probability of being negated, the index should head lower at the beginning of the week. By the same token, the last 2 weeks of the year have historically been a low participation period and it is somewhat unlikely that there will be enough traders around to push the index in either direction with much success.

SPX Friday closing price - 1219

The SPX generated a red close on Friday making the previous week's close at 1255 into the third successful retest of the year's high weekly close at 1363. The index is still in a downtrend and the positive action seen the previous 2 weeks was not successful in turning the trend around. By the same token, the index did not make a strong negative statement either when it was able to close on Friday just above an important weekly close pivot point seen throughout the year at 1218.

The SPX is stuck trading between the 50 and 100 week MA's, much like the NASDAQ, with the traders awaiting the fundamental information that is due to come out the first couple of weeks of January. In the meantime, the monetary support that has been promised by the ECB has prevented the immediate default by any bank or country giving the index at least a temporary respite from further fundamental negative action.

On a weekly closing basis, resistance is minor to decent at 1255 and at 1268 and decent at 1285. On a daily closing basis, resistance is minor to decent between 1261 and 1263, minor at 1275 and decent to strong at 1285. 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 to decent between 1212 and 1218. Below that, no support is found until decent support at 1158.

The SPX closed at 1211 on Wednesday and did generate 2 green closes in a row immediately after that suggesting that further upside could be seen. By the same token, a close below 1211 any day this coming week would be considered a strong negative inasmuch as there is no daily close support below that level until the 1158 level is reached. This means that the index needs to continue to generate green closes at the beginning of the week or the technical bears will jump aboard one more time.

The SPX does have MA support at the 1204 level from both the 100 day and 100 week MA. Nonetheless, that support is more based on a closing basis than intra-week.

The previous week's high at 1268 is now considered decent resistance but on the daily closing chart resistance is at last week's high at 1231, which is also approximately where the 50-day MA is presently (at 1228). As such, any close above 1231 would be considered a short-term positive that would likely lead the index up to test the 1268 level. The probabilities favor the downside but until the index is able to close below 1204 it is unlikely that any "new" technical selling will be seen.

The volume dried up this past week with the exception of Friday when triple option expiration occurred. By the same token, nothing happened on Friday, as far as the close is concerned, which suggests that the traders liquidated their options but did not lean on one direction or the other for the next round. The holidays loom ahead and for the next 2 weeks trading is likely to die down even more as no news of consequence is expected to come out until the New Year arrives.

The probabilities favor a bit more downside this coming week but not by a big margin as most traders have finished their trading for the year and will not be present. Nonetheless, the outlook for the world economy continues to be gloomy and if there is any action of consequence it probably will be for the downside. Some economic reports are due out this week, such as Durable Goods on Friday, but for the most part reports have been ignored as of late and there is no reason for that to change this week.