DOW Friday closing price - 12777

For the past 5 weeks the DOW has been trading with a slight upward bias (higher weekly highs and higher weekly lows) but in a trading range pattern that suggests more uncertainty than conviction. The index has closed on or very near the highs of the week on 2 occasions only to see only a small follow rally the following week and a reversal red weekly close. The same identical type action has been seen on the red closes with follow through action to the downside during the week followed by a reversal green close. The previous 4 weekly closes have been green, red, green and red. With the index having closed green and near the highs of the week on Friday, follow through to the upside is expected this coming week with a strong possibility the index will once again close in the red next Friday.

In addition, the DOW has been generally pivoting around last year's high weekly close at 12810. The last 5 weekly closes have been 12767, 12640, 12880, 12772, and 12777. Though the upward bias is evident on the intra-week chart, last week's close was the first time in the last 5 weeks that the index closed in the green but not above a previous high weekly close and it could be a sign that resistance area mentioned is a bit stronger than the slight uptrend seen on the chart.

On a weekly closing basis, resistance is minor to decent at 12810, minor to decent again at 12880 and minor at 12982. On a daily closing basis, resistance is minor to decent at 12837 and decent at 12943. Above that level, resistance is decent at 13005, minor at 13115, and decent to strong between 13252 and 13279. On a weekly closing basis, support is minor at 12640, very minor at 12479 and at 12369. Below that level, minor to perhaps decent support is found at 12118. On a daily closing basis, support is minor to decent at 12715, decent at 12573 and decent again at 12502. Below that level, support is minor to decent between 12369 and 12411.

The DOW closed near the highs of the week and follow through to the upside is expected. Based on the upward bias shown over the past 5 weeks the probabilities favor the index getting above the recent intra-week high at 12961 and getting up to the 13000/13055 area. Nonetheless, the fact the weekly close on Friday failed to close above the previous high weekly close at 12880 suggests this coming week could be different and perhaps indicative. It is highly likely that the index will get above last week's high at 12830 as intra-week follow through to the close has been constant during the past 5 weeks. On this occasion, though, the intra-week high from last year at 12876, as well as the intra-week high seen 4 weeks ago at 12898, will be important and indicative resistance. This is especially true since the traders have been expecting the earnings reports to continue to show growth and by the close next Friday several important DOW stocks, such as GE, AXP, KO, JNJ, and IBM, will have reported giving the index either a boost or a disappointment.

If the bulls fail to take the DOW intra-week above 12876/12898 the recent upside bias will change to at least a sideway trend, if not the beginning of a topping out pattern and a downtrend. As such, the 12876/12898 level is going to be the most important chart level to be seen this coming week.

The DOW closed on a very strong note on Friday after earnings on WFC and JPM came out better than expected. The index spiked up after breaking above Thursday's high at 12630, suggesting that Thursday's low at 12492 was the second successful retest of the 200-day MA, currently at 12465. The spike and the close on the highs of the day suggest "strong" follow through will be seen on Monday if the economic reports due out Monday morning before the opening (Retail Sales and Empire Manufacturing) are not much worse than expected.

Resistance in the DOW will be found at the 100-day MA, currently at 12835, and at the important intra-week high seen on June 17th at 12898. The action on Friday suggests that those resistance levels should be broken and the index get up to at least the 9-week high seen 2 weeks ago at 12961. Resistance is expected to be decent to strong there, but likely to get broken on Tuesday if the DOW earnings reports on KO and JNJ, which come out that morning before the opening bell, are better than expected. If the resistance at 12961 is broken the index will likely get up to the 13000 level and perhaps up to 13055 where the next resistance is found.

To the downside, the DOW once again should find support at the 12700/12715 level where a previous low of consequence at 12715 was seen on April 10th as well as the "general" support that is found at 12700. On the intra-day 60-minute chart, support is also found between 12686 (low of some consequence seen 7/9) and 12715 (50 60-minute MA), making that level pivotal and important support at this time. Should that level of support break, no support on any chart is found until 12580/12615 is reached and even then that support is only found on the intra-day chart. Simply stated, if the index starts trading below 12685 Friday's rally will lose its strong upside impact and the index will get back under selling pressure with strong probabilities of breaking the recent low at 12495.

It is clearly evident on the DOW chart that 12898 and 12685 are key levels to this week's trading action. The traders are likely to take their cue on what direction to push if either of those levels are broken. Trading within those levels will not be indicative. I do believe the probabilities favor the DOW trading most of the week within that trading range (no breakout or breakdown) and on Friday, after Thursday's late day earnings report on GOOG comes out, the traders will opt to close the index favoring the bulls or the bears, awaiting the biggie report on AAPL due out on Tuesday the 24th.

Monday could be a decisive day for the week.

NASDAQ Friday closing price - 2908

The NASDAQ closed in the red for the first time in the last 6 weeks suggesting that the index may have found a resistance area the traders are interested in selling. By the same token, the index continued to close above last year's high weekly close at 2873 and therefore the red close on Friday might be considered more of a retest of the recent break above that level rather than a sign of a top-to-the-rally being found.

The NASDAQ, in spite of the late and strong rally at the end of the week, underperformed the other indexes and that has to be of concern to the bulls as there are several reasons (U.S. Elections ahead, European debt problems, economic world-wide slowdown) to think that fundamentally the indexes have either topped out or are close to topping out for the next 4-6 months.

On a weekly closing basis, minor resistance is found at 2937, minor again at 3000, minor to decent at 3069, and decent to strong at 3091. On a daily closing basis, minor resistance is found at 2930, minor to decent resistance is found at 2976 and again at 2988. Above that level, decent resistance is found at 3069 and strong at 3122. On a weekly closing basis, support is minor at 2873, minor again at 2778 and minor to decent at 2747. Below that level, support is minor at 2686, minor to decent at 2643 and decent at 2616. On a daily closing basis, support is minor to perhaps decent at 2866/2870, very minor at 2849, and decent at 2836.

The NASDAQ generated a drop of 5% from the previous week's high to the low, compared to a drop of 3.5%/3.6% in the DOW and SPX. The strong intra-week drop suggests that the traders have started to liquidate their long positions envisioning a top to this rally and the beginning of a downtrend. A 1-week change could be just an anomaly but it does "raise flags" as to the continued validity of the rally.

To the upside, the NASDAQ will now find minor to decent daily close resistance at 2930 (2942 intra-week). The 2930 close was the high daily close seen on June 20th and from which a drop of 124 points occurred thereafter. It should also be noticed that the 2942 high seen that day was a successful test of the 100-day MA, which was at that time at 2950. The 100-day MA is currently at 2952 and will offer once again the kind of resistance seen on June 20th. A rally and close near that level is expected to be seen one day this week but a red close the day after would be a very negative sign as it would create a possible Head & Shoulders formation as well as a successful retest of the 2 resistance levels recently seen. Above 2930 the index does show decent daily close resistance at 2976 which up to now has been considered a successful retest of the 3000 level that has been strongly anticipated to happen after the index broke above last year's daily closing high at 2873. A close above 2976 would suggest the index will explore the 3000 level resistance again.

To the downside, the NASDAQ shows no intra-week support until Thursday low at 2837 is reached. Some minor support on the 60-minute chart is found between 2866 and 2875 but it is of small consequence. The 2837/2877 area does show some importance as a support area but more as a pivot point level as it has been seen copiously as a high or a low during the last 7 weeks, as well as being an important high on July 22nd of last year. A close below Thursday's close at 2866 would give a sell signal, a close below the previous low daily close at 2836 would be a second sell signal, and a close below the 200-day MA, currently at 2815, would be confirmation that the sell signals are valid.

The NASDAQ did close on the highs of the day on Friday and follow through on Monday is expected. No resistance is found on the daily chart until 2942 is reached and it is expected the index will rally up to that level at the beginning of the week. Further resistance is found at last week's high at 2953 and the probabilities of that level getting broken this coming week are decent since the index did close in the upper half of the week's trading range on Friday. Nonetheless, a break above 2953 will likely trigger some chart buying as the 100-day MA would be broken if the index closes above that price. The recent high at 2987 would then be close enough that the traders would likely "go for it" especially since the 3000 level would become a strong magnet. As such, I do believe that the 2953 level is a pivot point for this week and a level the bears will strongly defend. A failure to get above 2953 could cause enough disappointment to push the index back down near this past week's low at 2837 before the week is over.

It should be mentioned that Friday's low in the NASDAQ at 2873 is also where the 50-day MA is currently at. The 50-day MA is always an important indicator and if broken this coming week it would likely generate additional selling.

The probabilities favor the NASDAQ trading between 2895 and 2942 on Monday and then depending on how the traders react to the earnings reports coming out on Tuesday, taking further direction thereafter.

SPX Friday closing price - 1356

The SPX traded mostly like an spectator rather than a principal this past week inasmuch as the index did not rally as much as the DOW or dropped as much as the NASDAQ, and this in spite that the earnings reports of consequence this past week (JPM and WFC) were index related and better than expected. It is likely, though, that the SPX will be the most indicative index at the beginning of the week inasmuch as it is the closest index to resistance as well as the fact that C reports on Monday before the opening and GS reports on Tuesday before the opening.

The SPX closed on the highs of the day/week on Friday but faces still resistance at 1363 (just 7 points above Friday's close) and even stiffer resistance at the high for the last 2 months, seen the previous week, at 1374. With a couple of important index-related earnings reports due out Monday/Tuesday, it is highly likely the traders will decide a more definite course of action no later than Tuesday morning.

On a weekly closing basis, resistance is decent to strong 1363 and minor at 1370. Above that level, resistance is decent to strong at 1403 and strong at 1408. On a daily closing basis, resistance is minor to decent at 1363, minor to decent again at 1370 and decent at 1374. On a weekly closing basis, support is very minor at 1354, minor at 1335 and decent 1278/1279. On a daily closing basis, support is minor to decent at 1334, minor to decent at 1343, minor at 1323 and again between 1305 and 1308.

The SPX has the same pattern as the DOW as far the green, red, green, red and Friday's green close and also with the close on the highs, follow through, and reversal and close in the red the following week and vice versa. In addition, like the DOW, the index has been having trouble getting above last year's high weekly close at 1363 and has been trading around an important pivot point weekly close resistance at 1343 with closes the past 5 weeks at 1342, 1335, 1362, 1354, and 1356. The index is especially sensitive right now to the financial industry given that most of the important financial earnings reports come out the first 10 days of the earnings quarter as well as the fact that Europe is due to come out with the details on the Euro banks support package by the end of the month.

It is important to note that the SPX has not yet been able to close above last year's high weekly close at 1363 on this rally in spite of the index closing above last year's high "daily" close at 1370 (closed at 1374) one day last week. More importantly, the index now shows a 3-point downtrend line on the daily chart that looms ominously as 3 points on a line makes it viable. The 3-point downtrend line is drawn using the high daily close on April 2nd at 1419, the high daily close on May 1st at 1405, and last week's daily closing high on July 3rd at 1374. I don't know if the fact the highs all came in the first few days of trading of each month is important or not, but the line is now drawn and likely to be respected by the traders. A break of that line with a close above 1374 would be a strong buy signal but at this time it is considered a strong bearish sign.

Monday could be an important trading day for the SPX inasmuch as the index closed at a minor to decent resistance level at 1357 that includes the 100-day MA, currently at 1359. With C reporting Monday morning before the opening, if the index closes in the red tomorrow it will be seen as a negative sign and selling, perhaps of consequence, will likely ensue.

Likely indicative support in the SPX is now found at Thursday's low at 1325 (1334 on a daily closing basis). At that price, the 50-day MA is currently located and with the strong bounce seen on Friday from that line a close below that level would be a sell signal both on a daily close of consequence being broken but also because of the important MA line located there. The next support below 1325 is at 1309 and that support is also important because it includes the 200-day MA, presently at that price as well. A close below 1309 would generate a second sell signal and one that the traders would likely get aggressive with.

Follow through to the upside up to 1363 is likely to be seen on Monday but after that it will depend on a lot of things that are not yet totally clear.

The market showed a bit more weakness than was expected this past week signaling that traders are slightly more bearish than they were 2 weeks ago. Nonetheless, the first 3 weeks of any earnings quarter generates a lot of "short-term" reactions based on how earnings come out, not only on an individual basis depending on the importance of the company but also on an industry basis depending on the health of the industry in question. As such, it is impossible at this time to give as much importance to the weakness seen this past week as would be given at other times. By the same token, the underperformance and strong selling seen in the NASDAQ this past week is a cause for concern that will likely need some positive fundamental piece of news to negate.

Quite a few important companies report this week, with GOOG on Thursday after the close likely being the most important. Nonetheless, GE, AXP, IBM, KO, and JNJ also report and they do represent the DOW which was the "leader of the pack" this past week meaning the index could possibly be the key to the market this week, especially since the index represents Blue Chip Stocks and the safety of principal seems to be heavily in the minds of the traders at this time.

The probabilities do not favor any major surprises in earnings as has so often been seen in previous earnings quarters. The slowdown in the economy, which is already an established situation, is likely going to prevent companies like AAPL from reporting earnings way above expectations as seen before. On the other side of the coin, nothing of great consequence has yet happened that would cause companies to report much worse-than-expected earnings either, suggesting that the next couple of weeks are likely to be less volatile than seen at other times. As such, expect this coming week to be mostly sideways trading with the only thing in question is whether the bias will be slightly to the upside or slightly to the downside.