DOW Friday closing price - 13343

The DOW confirmed the sell signal given on the weekly closing chart the previous week with a second close in a row below the previous low weekly close at 13437. Confirming the sell signal was not easy for the bears though, as the index traded above 13437 for 3 of the 5 days of the week and it wasn't until "all" the earnings reports for the week came out that the traders decided that the probabilities of the index resuming the uptrend had dissipated. The index was particularly hit on Friday when GE and MCD, 2 DOW barometers of the health of the economy, came out with earnings that disappointed. Those earnings, when added to the very disappointing earnings on GOOG that came out on Thursday, suggested that the rest of the earnings reports that are left are likely to follow the same pattern. It seems that the traders decided it was not worth the wait and started liquidating long positions.

On a positive note, though minimal, the DOW did not yet give a failure to follow through signal to the upside as a weekly close below 13276 is needed for that to happen. Nonetheless, the index did close on the lows of the week and just a few points below the previous week's low at 13296 suggesting that further downside will be seen this coming week and that the general support at 13300, as well as the previous high weekly close will be at risk of being broken if the news does not improve.

On a weekly closing basis, resistance is decent at 13593/13610, minor to decent between 13625 and 13669, decent at 13907 and major at 14093. On a daily closing basis, there is very minor resistance at 13413, decent at 13557 and decent to strong at 13593/13610. On a weekly closing basis, support is minor 13232/13275, minor to decent at 13090, minor at 12922, and minor to decent at 12849. On a daily closing basis, support is decent at 13328, minor to decent between 13232 and 13275, minor to decent at 13090, minor at 13046/13057, and minor to decent again at 13000.

The DOW rallied mid-week and did get to an intra-day high of 13588 and a daily closing high at 13557. Both of those highs are now considered successful retests of the intra-week double top at 13653/13661 and of the daily closing double top high at 13593/13610. The successful retest of those levels now gives the technical traders a strong chart reason to sell as well as a clearly defined level to use as resistance to sell against. The bulls are now on the defensive needing positive earnings and economic reports in order to turn the momentum back to the upside and the probabilities of that happening are now severely curtailed as the earnings and economic reports trend seems to be favoring the bears.

The DOW did close on the lows of the week and further downside is likely to be seen this coming week. An important DOW stock (CAT) does report earnings on Monday morning before the opening and could add or negate some of the bearish momentum that was seen on Friday. Nonetheless, CAT is not a catalytic earnings report company such as GOOG or even GE and MCD are and therefore the probabilities do not favor it helping the index much if the report is positive. On the other hand, if the earnings report is also negative, as so many reports have been this earnings quarter, it could be the "nail in the coffin" and push the index to break indicative support levels.

The previous 54-month daily and weekly closing high for the year, prior to the recent rally up to 13661, was 13275 and if the DOW closes below that level any day this coming week and more importantly next Friday, a failure to follow through signal would be given that would cause strong technical selling to appear. On the weekly chart of the DOW there is no intra-week support until 12978 if the index closes below 13275 and even then that support is considered minor. Stronger support but at best decent is found between 12710 and 12734. That level does include the 50-week MA, currently at 12795 making it a very likely target but also one that would likely see a bounce occur.

To the upside, the DOW did generate a strong spike down on Friday making it very difficult for the bulls to generate any kind of meaningful rally without some fundamental help. By the same token, there is no resistance on the intra-week chart until minor resistance at 13522 is reached. As such, if the bulls are able to turn the index around due to some unexpected good fundamental news, then Friday's 200+ point drop could be erased in one day. On the intra-day 60-minute chart some resistance is found at the 50 60-minute MA, currently at 13440, and again at the 200 60-minute MA, currently at 13500. It should be mentioned that if the index closes below 13275 then the previous intra-week high at 13338 will become resistance.

The DOW is under strong selling pressure and the only thing that stands in the way chart-wise is the previous daily and weekly closing high at 13275. Previous highs are not considered strong chart support and with the fundamentals seemingly taking a turn to the negative and the index closing on the lows of the week, down over 200 points on the day, and only 68 points from that level the probabilities favor the support breaking. A failure to follow through signal would be taken very negatively at this time with the elections and Fiscal Cliff looming ahead as it seems that technicals are the "only" thing holding the index up at this time. A close below 13275 will likely cause an immediate drop down to 13000 and since the support at that level is mostly psychological, the probabilities favor the index dropping down to the 12700 over the next 2 weeks and at that time the traders taking a pause to consider if further downside would be proper.

NASDAQ Friday closing price - 3044

The NASDAQ continued to see the bulk of selling as tech stocks have been the hardest hit of the industries being sold at this time. AAPL has dropped closed to 15% in value of the past few weeks and GOOG received a bad earnings report causing the stock to fall 15% as well, just this past week. The chart of both of these stocks suggest that further downside will be seen before reaching levels where buying is expected. This coming week more of the same is likely to be seen when AAPL and AMZN report after the close on Thursday as all tech stocks seem to be getting bad earnings reports. As such, further downside is expected.

The NASDAQ did reach an important psychological support level at 3000 on Friday and held but unfortunately the level has not proven technically to be more than a minor support/resistance level in the past and it is not expected that it will hold up if the earnings reports continue to come in worse than expected. In addition, the index has already given a confirmed failure to follow through signal having closed 2 weeks in a row below the previous 13-year high weekly close at 3091 suggesting that further downside will be seen with last year's high weekly close at 2873 being a likely objective.

On a weekly closing basis, there is minor to perhaps decent resistance at 3091, minor at 3136 and decent at 3183. On a daily closing basis, resistance is minor at 3069, decent at 3091/3104 and again at 3149 and decent to perhaps strong at 3183/3182. On a weekly closing basis, support is minor at 3000, and again at 2908. Stronger support is found 2873 and at 2847. On a daily closing basis, support is minor between 2988 and 2991, minor to perhaps decent at 2961/2970 and then minor to perhaps decent again at 2910.

The NASDAQ has added another chart negative to the equation with a successful retest of the runaway/breakaway gap formation that had been built. The runaway gap is between 3130 and 3125 and the rally on Wednesday up to 3112 followed by a new 8-week low on Friday is a confirmed successful retest of that formation. This negative is in addition to the Double Top at 3193/3195, the confirmed breakaway/runaway gap formation, the break of the 50-day MA, and the break of the neckline of the haphazard Head & Shoulders formation that has a 2975 objective. All of these events, added to the failure to follow through signal already given and confirmed the previous week and the close on the lows of the week, suggest that follow through to the downside is likely to be seen this coming week putting the index in a now defined short-term downtrend.

Nonetheless, the NASDAQ is now getting close to levels of support around 2970 that will likely help define what is to come in the next few months. To begin with, the H&S formation mentioned above did give a 2975 objective which will likely be reached this coming week. Secondly, the 200-day MA is currently at 2970 and that is a line that is recognized as defining whether a stock or index is still in a long term trend or whether that has changed. In addition to the 200-day MA, the NASDAQ finds quite a bit of previous intra-week lows of consequence around 2970 with at least 6 previous highs and/or lows all between 2970 and 2987 seen over the past 6 months, not to mention the fact that it is the lower end of the 3000 demilitarized zone.

By the same token, the 2970 area has no meaning to the weekly chart and that could be problematic for the bulls as the NASDAQ weekly chart suggests the index should be heading back down to the previous 13-year weekly closing high seen last year at 2873, which also includes the important 50-week MA, currently at 2905. The weekly chart normally takes precedence and based on the fact that several of the main components of the index, GOOG and AAPL are looking to head lower and another important stock in AMZN is reporting earnings on Thursday, the possibilities of the index getting as low as 2873 intra-week are high.

The NASDAQ did have a big trading range of 107 points this past week and did close on the lows of the week suggesting further downside, perhaps of as much consequence, will be seen this coming week. With the index having few expectations of a rally occurring, at least not until the important economic and earnings reports come out on Thursday and Friday, the probability of the index getting down as low as 2873/2900 this coming week are high.

To the upside, there is little resistance above in the NASDAQ. Some resistance will be found at the minor support level that was broken on Friday at 3040 but the probabilities of the index getting back up to that level after a 66 point spike down day on Friday are low. Above that level there is a bit of previous high resistance at 3058/3059 and a bit stronger resistance at 3080. The index has no earnings reports of consequence until Thursday after the close and therefore there is little expectation that a rally will occur before then. By the same token, if the index can start trading above the 3040 level, the traders will likely turn around and become at least day-trade buyers. As such, expect 3040 to be a pivot point this coming week, though unlikely to be seen.

The NASDAQ chart is about a bearish short-term as it can get, both chart-wise and fundamentally. The big question this week is whether the bulls will be able to generate some buying based on the daily chart or whether the weekly chart will take precedence. Probabilities favor the weekly chart, especially due to the very weak close on Friday and the big down trading range seen this past week.

SPX Friday closing price - 1433

The SPX, like the DOW, confirmed the sell signal given on the weekly chart with a second weekly close in a row below 1440 suggesting that further downside is yet to come. Nonetheless, with most of the important financial earnings reports already out the index has now taken a back seat to the other indexes and is likely to follow what happens elsewhere instead of being an instigator of movement.

The earnings reports of the financial companies in the SPX mostly came in slightly better than anticipated but not to the point that the traders would become aggressive buyers in the face of a weakening tech sector or an economy that is faltering. In addition, the better than expected earnings reports are still not good enough to stop the traders from worrying about all the financial pitfalls that still exist in Europe and other places around the world.

On a weekly closing basis, resistance is minor at 1460 and minor to decent at 1465. On a daily closing basis, resistance is very minor at 1437 and at 1447, decent at 1460 and decent to strong at 1465. On a weekly closing basis, support is decent at 1406. On a daily closing basis, support is minor at 1433 and minor to decent at 1428. Below that level, resistance is minor to decent at 1399/1402.

The SPX tested the 50-day MA, currently at 1433, successfully a week ago Friday but the index now finds itself 5 days later back on the line and having closed on the lows of the week suggesting that further downside will be seen this coming week. Any daily close below 1428 or an intra-week break below 1425, will not only break the MA line but also the only support left before 1400 is reached. It should be mentioned that even though the 1400 level is decent psychological support, the intra-week support at that level is no better than minor, suggesting that if the 1425 level gets broken, a drop down to the 200-day MA, currently at 1375, could be seen.

It should be mentioned that last year's high daily close in the SPX was 1363 and the intra-week high was 1370 and like with the other indexes, that previous high seems to be the downside objective on the weekly chart. It should also be mentioned that the 50-week MA, which is an important line on the weekly chart, is currently at 1355 and moving higher and likely to be around 1365 in about a week or two at the most, suggesting that a drop down to 1363/1370 within the next couple of weeks is a very viable downside objective.

To the upside, the SPX has the same situation as the other indexes inasmuch as the steep drop seen this past week has left a vacuum to the upside as far as resistance is concerned, meaning that if the bulls are able to turn the momentum around the index could rally all the way back to the 1460 level without finding any chart resistance levels of consequence. The 60-minute chart does show some resistance at the 200 60-minute MA, currently at 1450, but before that level is reached there are no resistance levels the bears can depend on.

The SPX chart does look weak and with high probabilities of breaking down below 1425 this coming week. The big financial companies have already reported earnings and therefore no help can be expected from that sector. As such, the index will need to depend on what the market does in general and based on the news as the recent action it does suggest that a break and a drop down to at least the 1400 level will be seen this coming week.

This past week the bulls had the opportunity to resume the uptrend having been able to turn the indexes around on Monday after testing successfully important short term support levels a week ago Friday. Nonetheless, the earnings reports this past week did not support the bull's position and after a 3 day rally at the beginning of the week in which the recent previous highs were tested but not broken, the traders "gave up the ship" and the indexes started heading lower. The indexes got hit on Thursday with a very disappointing earnings report from GOOG and were all out on Friday to stay above the previous week's close, eking out a small gain for the week but closing on the lows of the week suggesting further downside, likely of consequence, will be seen this coming week. The NASDAQ did not fare as well as the other 2 indexes closing in the red for the week and again leading the way down.

This coming week does have a few important earnings and economic reports with CAT reporting on Monday before the opening and AMZN and AAPL reporting on Thursday after the close, as well as the always important GDP Adv number coming on Friday morning before the opening. Nonetheless, it is possible that the traders have seen enough clues from the reports that have already come out for the quarter to surmise that the reports this week will continue to show a slowdown in the economy and that no rally will occur. If that is the case, the indexes are likely to continue the strong spike down seen on Friday on Monday and head down to the next level of support where some technical buying is expected to be seen. Nonetheless, that would mean at least another 1.5-2.5% drop in price. No last-minute "miracle" help is expected from the Fed or the ECB this coming week so it is going to be difficult for the bulls to prevent such a fall from occurring.

It should also be mentioned that the election is only 2 weeks away and the Fiscal Cliff is only 2 months away and neither of those are events that can be predicted at this time. As such, the traders are more likely to liquidate long positions or even institute new short positions than continue trying to resume the uptrend.