DOW Friday closing price - 12767

The DOW followed through on the previous week's strong close by rallying up to close near last year's weekly closing high at 12810 in what seems to be a test on whether the index has topped out for the year or the uptrend is resuming. The test is not only technical in nature but fundamental as well based on the fact that an important election is occurring in Greece on Sunday that could be a major catalyst for the Euro and the banking institutions in Europe, which in turn would affect the markets worldwide.

The DOW closed strongly on Friday suggesting the traders do not fear the Greek elections as no profit taking was seen going into the weekend. Nonetheless, from a technical perspective it was expected that the index would at some point test the previous weekly closing high which gave a failure to follow through signal when broken 6 weeks ago. If the retest is successful (a red weekly close next Friday) the traders will surmise that the uptrend is broken and that a downtrend has begun. If the failure to follow through signal is negated, it will stimulate new buying and a resumption of the uptrend. This coming week is indeed a pivotal point for the index.

On a weekly closing basis, resistance is decent between 12810 and 12849. Above that level, resistance is decent at 13228. On a daily closing basis, resistance is minor 12890 and minor to decent at 13005. Strong resistance is found between 13252 and 13279. On a weekly closing basis, support is very minor at 12479 and at 12369. Minor to perhaps decent support is found at 12118, and decent between 11858 and 11934. On a daily closing basis, support is very minor at 12715 and minor to decent between 12369 and 12411. Below that, decent support is found at 12101.

The DOW broke above a decent intra-week resistance at 12753 (12715 and 12724 on a daily closing basis) on Friday suggesting that further upside will be seen on Monday. Nonetheless, the break occurred in the last 15 minutes of trading and based on the fact that it was options expiration day, as well as a day with high emotional tension, importance to the break is diminished. It is evident that the index is at a major pivot point that will likely be decided by the Greek elections on Sunday and therefore a chart break of a few points is meaningless.

The DOW did close above the 50-day MA on Friday, currently at 12745, and a green close on Monday would give strength to the break as the 50-day MA is an important line the traders follow. No resistance of consequence over the past 12 months is found until 13000 is reached, so follow through to the upside on Monday, especially on a closing basis, would likely add an additional 230 points to the index next week, at the very least. The 100-day MA is currently at 12865 and last year's intra-week high is at 12876, so that level could have some stopping power. Nonetheless, neither of those 2 levels is likely to stop the index for much more than a day or two if the fundamental news is considered as long-term positive.

To the downside, Friday's low at 12651 is now important from the point of view that a break below that level will make Friday's high a successful retest of the important resistance at 12724/12810 area. The next level of support of importance is last week's low at 12398 as a break of that level would suggest that the high of this rally has been seen and that the downtrend has re-started.

There is not much more to say at this time since the DOW is at an important pivot point that will likely be decided by fundamental news and not on charts.

NASDAQ Friday closing price - 2872

The NASDAQ did not participate in last week's rally as much as the other indexes but did close at a major pivot point on Friday as 2873 was last year's weekly closing high. A green close next Friday would re-stimulate the uptrend and negate the failure to follow through signal given 5-weeks ago. By the same token, a red close next Friday would mean the important resistance from last year would have been retested successfully and that a downtrend has begun. It is important to note that with this index (contrary to the DOW and SPX) the same level of resistance is seen on the daily chart as on the weekly chart, meaning that a green or red close on Monday will likely be as indicative as the one next Friday.

From a purely technical perspective, the NASDAQ has a bearish looking chart with an inverted flag formation still clearly in place. The flag would be negated if the index is able to rally above 2900 but as of this writing the chart suggests a downside resolution. The downside objective of the flag is 2472, if the bottom of the flag at 2726 is broken.

On a weekly closing basis, decent resistance is found at 2873. Above that level, minor resistance is found at 3000, minor to decent at 3069, and decent to strong at 3091. On a daily closing basis, decent resistance is found at 2873. Above that level, resistance is minor at 2910 and at 2961. On a weekly closing basis, support is minor at 2778 and minor to decent at 2747, minor at 2686, minor to decent at 2643 and decent at 2616. On a daily closing basis, support is very minor between 2808 and 2818, minor to decent at 2778 and decent at 2747.

The NASDAQ is the key for this coming week as it shows clear decent intra-week resistance at 2878 and some minor resistance from previous lows at 2900. Above that level, though, there is nothing until 3000 is reached. By the same token, a green close on Monday will be considered a strong chart positive that will negate the failure to follow through signal that was given 5 weeks ago.

To the downside, a drop below Friday's low at 2837 would be a negative and suggest a successful retest of the resistance level has occurred. A drop below last week's low at 2802 would be more of a negative as the weekly chart would also suggest the downtrend is resuming. Last week's low at 2726 is very important support as a break of that level would give a short-term objective of 2600 as well as give a 2472 objective based on the inverted flag formation now in place.

SPX Friday closing price - 1342

The SPX reluctantly got above the recent high at 1334 this past week to run up to a decent previous resistance of some consequence at 1343/1345. Nonetheless, the index continues to show general weakness in comparison to the other indexes as last year's high at 1370 is still relatively far away from being reached and tested, which is something the other indexes accomplished this past week. This trend is likely to continue as European banks are still having problems and banks in general have lost much of their ability to generate profits due to the increasing restrictions on investments they now have. Simply stated, it is likely the index will continue to underperform the other indexes.

The SPX did close on Friday at a level of resistance at 1343/1345 that was important on 2 separate occasions last year and that also suggests that a red close next Friday would be considered a strong negative. A green close, though, would still leave last year's weekly closing high at 1363. On a weekly closing basis, resistance is decent at 1343/1345 and decent to strong between 1363 and 1370. On a daily closing basis, resistance is decent between 1343 and 1345, decent at 1353, decent to strong at 1363 and minor to decent at 1370. On a weekly closing basis, support is minor at 1316 minor to decent at 1278/1279, and again minor to decent at 1268. On a daily closing basis, support is minor between 1305 and 1308, minor to decent at 1295 and decent at 1278.

Resistance on the daily chart for the last year in the SPX is shown at 1346 (high seen July 21), at 1349 (50-day MA) and at 1356 (high seen July 7th). In addition, the index shows an important double bottom at 1357/1358 that was seen in April, giving that area quite a bit of resistance power. With the index representing the financial sector, these resistances are important and likely indicative. On the weekly chart, though, the index would literally need to get above 1370 to generate much new buying interest.

As far as the downside is concerned, the SPX will give a small failure signal if it goes below Friday's low at 1329 and even more so if it goes below last week's low at 1306. In addition, any close this week below the high daily close for the last 5 weeks at 1332 will suggest a failure to follow through on Friday's mini breakout.

The SPX is likely to be a measuring stick when being compared to the other indexes, especially if the indexes rally on Monday. The index still has quite a few important resistance levels above and if the resolution from the Greek elections is a positive, it is likely the index will say just how positive it really is depending on whether the resistance levels up to 1370 get broken or not.

I have not given any probability numbers siding in one direction or the other in this newsletter as the fundamental scenarios facing the market this week are hard to quantify. This is especially true given the strength seen at the end of the week in spite of the traders facing what could be a very negative resolution on Sunday to the Greek crisis. In addition, analysts are split evenly as to what to expect of the U.S. market to do the rest of the year and the opinions are just as strong in one direction or the other. As such, it would not be surprising to see the bulls push the market higher on Monday and gain the type of momentum to the upside seen in the past, especially since the indexes are at an important pivot point on the charts.

It is evident, though, that the Greek elections on Sunday will clear up some of the questions that are being asked. By the same token even if the Socialists win that does not guarantee that the Greeks will leave the Euro or that the European banks will face a "Lehman" type moment. There will still be lots of questions and few answers, at least the first couple of weeks, meaning that the traders could still "play" with the market depending on exactly what happens on Sunday.

I do believe though, that the traders have set themselves up to make some determination on direction this coming week and probably on Monday. The yo-yo type action seen recently is confusing to all and traders would rather have direction that simple choppiness having to guess what direction is going to be seen from one day to the other. I also believe that the financial problems worldwide are not going to get resolved with the Greek elections (though they could get worse) and that the most likely outlook for the markets is a continued slowdown and contraction which will not be resolved totally until Europe resolves their problems to the satisfaction of all. As such, I do believe that no matter what happens on Sunday with the Greek elections the traders will opt for the short side and that the market will head lower. A very short-term positive knee-jerk reaction to the upside could be seen Monday if the Socialists lose, but the result at the end of the day could be red. Either way the elections come out it is difficult to come up with probability numbers today that can be depended on.