DOW Friday closing price - 12640

The DOW generated a negative reversal on the weekly chart having made a new 7-week high and then closing in the red and near the lows of the week. In addition, the high of the week at 12898 is likely to be considered a successful retest of last year's high at 12876 as well as a successful retest of the 4-year high seen in May at 13338, if the index goes below last week's low at 12561 this coming week. A successful retest of the 13338 high would likely mean the index will be a short-term downtrend the next few weeks and could also mean the index is now in a long term downtrend, though that would not be established until the low made in October at 10404 is broken.

The action seen this past week in the DOW has to be considered negative since last year's high at 12876 (12810 on a weekly closing basis) is an important and indicative resistance level on the chart. The bulls were successful in getting the index above that level intra-week by a slight margin but the fundamental picture they were relying on to generate new buying failed to materialize and the index was unable to follow through on the daily closing chart. The fundamental picture (new stimulus by the Fed) is not likely to occur now that the Fed announced they would continue "Operation Twist" and that means it is unlikely the Fed will consider new stimulus unless the market falls precipitously. Such a fundamental picture suggests the index will head lower.

On a weekly closing basis, resistance is decent between 12810 and 12849. On a daily closing basis, resistance is minor to decent between 12719/12724 and decent at 12837. 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 minor at 12573 and minor to decent between 12369 and 12411. Below that, decent support is found at 12101.

In looking at the weekly chart, the DOW seems to be in the process of building a mid to long-term top from which the index will get into a sideways or short-term down trend for at least the next 6 months or until after the elections occur. The top of the formation has been built with the 13338 high made at the end of April and further resistance is found at the high seen last year, as well as a week ago, at the 12876/12898 level. The formation has not yet been confirmed but based on the charts as well as on the fundamentals that are known at this time, the probabilities are very high that this formation will be confirmed this coming week or over the next couple of weeks.

To the downside, the DOW has 2 levels of support based on the idea of a sideways trend. The first level of support is 11800-12000 and the second level of support is down around 10700/11000. The probabilities favor the index getting all the way down to the 10700 level which is where the 200-week MA is currently at, nonetheless, getting down to that level is not something that is likely to happen immediately but over a period of no less than 3 months, if not longer. It should be mentioned that a drop down to the 10,700-11,000 level would create a major Head & Shoulders formation on the weekly chart that would determine the "long-term" outlook of the index depending on whether the support levels hold or break.

On a shorter-term basis, the DOW shows no support on the weekly chart until the 12000 level is reached. If last week's low at 12561 is broken, the probabilities of a drop down to 12030 over the next 2-3 weeks will increase strongly. On the daily chart, though, support is found at the 12300 level from a previous low of consequence, some congestion around 12396 seen 2 weeks ago, as well as from the 200-day MA, currently at 12350. In fact, I would venture to say that the probabilities are high that the index will get down to the 12300 level this coming week.

To the upside, the DOW will find decent resistance between 12700 and 12750. The index did close near the highs of the day on Friday suggesting the first course of action on Monday will be to the upside and probably up to that resistance. Above that level, decent to strong resistance will be found at last week's high at 12898 and even though it has not yet been confirmed that 12898 is a top, the fact that there was disappointment at the Fed announcement, as well as no economic reports of great consequence due out this week, likely means the bulls will have a tough time generating enough new buying this week to break above that level.

I do believe the DOW is in a sideways trend at the very least and that the next course of action is to go down to one of the possible bottoms of the trading range. It should be mentioned, though, that the 3rd quarter earnings results will start coming out the second week of July and the traders are not likely to be aggressive sellers until those start coming out, or until a further negative catalyst comes out of Europe.

I would venture to say the probabilities are high that the DOW will trade this coming week between 12300 and 12750. Having closed on Friday at 12540 (the middle of that trading range) it likely means the index will be the same amount of red and green this coming week. By the same token, the green should be seen early in the week and the red mostly in the latter part of the week.

NASDAQ Friday closing price - 2892

The NASDAQ was able to generate another weekly green close on Friday, as well as close above last year's important weekly closing high resistance at 2873, suggesting further upside is likely to be seen this coming week. With no chart resistance above until the psychological 3000 level is reached, the probabilities favor the bulls.

On the other side of the coin, the NASDAQ generated a spike-type move down on Thursday dropping 85 points from the high made on Tuesday and closed in the lower half of the week's trading range on Friday, suggesting the 2942 high made last week could be a spike top as well as a successful retest of the 3134 high made in March. In addition, one of the chart positives generated on Tuesday, in the form of a runaway gap between 2903 and 2908, was negated with the drop down to 2857, also suggesting that the bulls do not necessarily have the fundamental strength needed to take the index higher.

On a weekly closing basis, 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 minor at 2910, minor to decent at 2930, and minor 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 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 minor at 2873, minor to decent at 2859 and very minor between 2808 and 2818. Below that level, minor to decent support is found at 2778 and decent at 2747.

The NASDAQ has once again taken the leadership of the indexes and that has to be a worry to the bears as this is the index that has led the market up for the last 4 years. Nonetheless, on the daily chart the index now shows 2 successful retests of the 12-year high at 3134 with the high seen at 3085 seen on May 1st and the 2942 high seen on Tuesday and that could be a clear chart sign that the index is no longer heading higher. In addition, the index "stopped" at 2942 this past week and there is no previous resistance at that level. Any time an index or a stock does something technically unexpected it becomes a cause of concern. Adding to that is the fact that the index was able to generate a rally based on the fundamental premise that the Fed would be adding stimulus to the economy and that was proven not to be the case, suggesting that the index may have found a fundamental top to this rally.

To the upside, resistance in the NASDAQ will now be decent at the 2942 high seen on Tuesday. Above that level, minor resistance will be found at the 100-day MA, currently at 2955, and then nothing until 3000, which was a decent high seen on February 29th. The index does have an "established" runaway gap to the downside between 3016 and 3010 that has not yet been tested and if the index is able to get above 2942 a retest of that gap will be in order. The index does show some minor resistance at the 50-day MA, currently at 2910, that is also backed up with a previous low of consequence at 2900. The fact the index closed near the highs of the day on Friday, suggests that the 2900/2910 level will be seen at the beginning of the week. What the stock does there will be pivotal for the rest of the week.

To the downside, the NASDAQ shows support at Thursday's low at 2857. Below that, no support is found until the 2785/2800 level is reached which is where the last intra-week support is found (at 2800) as well as the 200-day MA (currently at 2785). A break below 2857 will likely cause the index to get down to that level. It should also be mentioned that any close below Thursday's close at 2859 will generate a failure to follow through signal on the daily chart that will be considered of consequence. Any close next Friday below 2873 would be a strong negative as well.

The NASDAQ is certainly creating a mixed-signal scenario in comparison to the other indexes inasmuch as last week's close was green whereas the other indexes closed in the red. The mixed signal scenario does suggest the NASDAQ will be a key this coming week to what the market does. Based on the close in the lower half of the week's trading range, as well as the fact that the NASDAQ is not the index that moves the market, the probabilities slightly favor the bears winning out. By the same token, the edge to the bears is slight.

SPX Friday closing price - 1335

The SPX had a reversal week having made a new 6-week high and then closing in the red and near the lows of the week. The reversal week takes on additional importance due to the intra-week high at 1363 as well as the previous week's close at 1343, both of those levels being important. Last year's weekly closing high was 1363 and the 1343 weekly close has been a strong pivot point for the last 16 months. As such, it can be surmised that the action in the index might have been a strong clue as to what to expect from the market over the next few weeks or months.

With the red close on Friday, the SPX seems to have tested successfully the 4-year high at 1408 made 3 months ago. No such retest on the weekly chart has yet been made, and if confirmed next Friday with another red close will give the bears a good reason to believe that further downside of consequence will be seen.

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 between 1353 and 1357. 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 at 1325 and again between 1305 and 1308. Below that level, support is minor to decent at 1295 and decent at 1278.

To the downside, the SPX shows no support until the 1291 level is reached. On the daily chart though, Thursday's low at 1324 does show some minor support as well as at 1306. Nonetheless, that support is all minor and the probabilities are decent that the index will drop down to at least the 200-day MA, currently at 1295.

To the upside, the SPX will find decent resistance at the 1343/1346 level, which is also where the 50-day MA is currently at. The index closed at 1335 and near the highs of the day on Friday and a rally up to 1343/1346 is highly likely to be seen at the beginning of the week. Further resistance is found at 1353 and at 1363. If the bulls are able to get above all of those resistances (unlikely), additional resistance of consequence will be found at 1370.

The action seen this past, and especially considering the intra-week and weekly closing levels where resistance was found, suggests the index has reached a top to this rally and that at least a short-term downtrend will be seen. The probabilities of the index dropping down to the 200-day MA, currently at 1295, as well as to the intra-week support at 1291 are decent. What the index does thereafter is not yet clear, but if the index is able to break below the 1250/1266 level, the probabilities of a mid-term sideways trend with either 1100 or 1200 as the bottom of the channel will increase strongly.

Based on the weekly chart alone, the SPX should see 1250 in the next 2-4 weeks.

The indexes gave mixed signals this past week with the DOW and SPX suggesting the downside and the NASDAQ "leaning" toward the upside. Nonetheless, from a fundamental point of view the probabilities favor the downside inasmuch as no solutions have yet been found for the European crisis and the hoped-for announcement by the Fed that further stimulus would be coming did not happen as only an extension of "Operation Twist" was given. As such, the fundamental picture remains negative for the short-term.

This coming week will have a decent amount of economic reports coming out with Durable Goods on Wednesday leading the way, followed by the third estimate of GDP and Initial Claims on Thursday, and ending with Personal Income and Spending, as well a Michigan Sentiment and Chicago PMI on Friday. In addition, Friday is the end of the month and some "window dressing" might also be seen. It should also be mentioned that Europe's 27 heads of state will meet on Thursday and Friday in an attempt to agree on a plan to restore confidence in the Euro and help out Italy, Spain and Greece with their debt crisis. An agreed-to plan of action, or lack of one, will likely affect the market and possibly change the outlook for the summer.

The indexes are likely to see the same amount of green and red this week as the DOW closed right in the middle of the expected trading range for this coming week. With no defining trend at the moment, it is likely that the traders will play the market technically, unless there are some unexpected economic reports or news from Europe. Aggressive buying or selling is not likely to be seen until the end of the week, or the beginning of the next, as traders will likely wait until the results of the European meeting on Thursday and Friday are given. By the same token, the bias could be to the downside as Europe's problems might be un-resolvable even if some agreement is found among the European heads of state. In addition, the only solution the economists seem to agree might work (banking union with euro-zone-wide deposit guarantees) is not something that Germany's Prime Minister Merkle is agreeable to. As such, the probabilities continue to favor a lack of resolve in Europe about how to handle the debt crisis.