DOW Friday closing price - 13107

The DOW generated a failure to follow through signal on Friday having closed below the previous high weekly close for the year at 13276 as well as the previous one before that at 13232. The index was able to rally enough on Friday to close above a previous minor weekly close support at 13090 leaving the door open for the index to rally this coming week, close above 13276 next Friday, and negate the failure signal if some unexpected fundamental piece of good news comes out.

The DOW did get down close to the 13000 demilitarized zone with a drop of Friday to 13039 but rallied enough at the end of the day to close above the 100-day MA, currently at 13090, as well as in the upper half of the day's trading range suggesting that the first course of action for the week will likely be to the upside. Having broken below the previous high and given a failure signal, the probabilities do favor a rally to test the break before traders make a decision on the trend for the rest of the year. Nonetheless, with the Jobs report due out this coming on Friday and the election the following week on Tuesday, it is probable the traders will do the technical chart work necessary during the next 7 trading days to set up the index for a clear direction immediately thereafter.

On a weekly closing basis, resistance is decent between 13232 and 13276. Above that level there is decent resistance at 13593/13610, minor to decent between 13625 and 13669, decent at 13907 and major at 14093. On a daily closing basis, there is decent resistance between 13252 and 13276, very minor resistance at 13413, decent at 13557 and decent to strong at 13593/13610. On a weekly closing basis, support is minor to decent at 13090, minor at 12922, and minor to decent at 12849. On a daily closing basis, support is minor at 13077, minor again at 13046/13057, and minor to decent at 13000. Decent support is found at 12849.

The 200-day MA in the DOW is at 12975 and on a daily closing basis that is an important chart line that determines the mid-term trend. There are already clear signs that the economy is slipping and that a recession could occur and that is why the index has come down to this level. Nonetheless, the election on November 6th is pivotal as a Romney win would likely energize Wall Street into a speculative buying spree that could bring about a rally up to the all-time high at 14198. As such, it is unlikely that the bears will have enough power to bring about a break of such an important line before the election.

Nonetheless, chart damage was done this past week in the DOW as the failure to follow through signal has been given. The bulls are on the defensive and do not have enough positive information at this time to negate the break, meaning that the probabilities are high that the index will fluctuate for the next 7 trading days between the 200-day MA and the area where the failure to follow through occurred. This is a high probability scenario due to the way the index reacted at the end of the week and the fundamental news schedule ahead.

Resistance in the DOW will be found at the previous intra-week high that was broken at 13338 (13232/13276 on a daily and weekly closing basis). Support will be found at the 200-day MA at 12975 and below that at 12856 and at 12710/12734. Probabilities favor the index trading within this 363 to 628 point trading range for the next 7 trading days. The only big question is whether the bears will be able to push the index intra-week to the lower levels of support or will the 200-day MA, in conjunction with some minor intra-week support at that price, stop any further selling.

The DOW closed near the lows of the week on Friday and further downside is likely to be seen at the beginning of the week. In addition, the index built a possible inverted flag formation this past week with the flagpole being the drop seen from 13344 to 13039 and the flag being the trading range between 13164 and 13039 seen the past few days. A break below the bottom of the flag at 13039 would give a downside objective of 12859, which fits in well with one of the main intra-week support levels mentioned above. Nonetheless, the inverted flag is not well built and with the 200-day MA at 12975 there are good possibilities that a break of 13039 will not bring about the flag objective.

I believe the key to what the DOW will do at the beginning of the week is the intra-week resistance built on Thursday and Friday between 13154 and 13164, which is also the top of the flag formation. A break above that level would negate the flag formation and leave the index with no resistance on the intra-week chart until the 13338 level. As such, I believe the 13154/13164 level is an important pivot point for Monday that could determine which of the week's objectives will be seen first. The DOW weekly chart suggests the downside will be seen first.

NASDAQ Friday closing price - 2987

The NASDAQ closed below the psychological support at 3000 level on Friday and near the lows of the week suggesting that further downside will be seen this coming week. No weekly close support is found until last year's weekly closing high at 2873 is reached. That support level is further strengthened by the 50-week MA, currently at 2910. By the same token, the index did bounce off of the 200-day MA this past week, currently at 2976, with a close on Wednesday at 2981 and 2 small green closes on Thursday and Friday, leaving the traders wondering whether to pay attention to the weekly or the daily chart this coming week. It is important to mention though, that the bounce off of the 200-day MA was weak at best, suggesting that the weekly chart will likely take precedence.

The NASDAQ continues to be under selling pressure as the earnings reports of its strong stocks came out worse than expected this past week and those charts suggest that further downside is likely to be seen. GOOG and AMZN charts suggest another red close will be seen next Friday and though AAPL might stop at the $600 level on a weekly closing basis, the stock could still see lower prices intra-week.

On a weekly closing basis, there is minor resistance at 3069, minor to perhaps decent resistance at 3091, minor at 3136 and decent at 3183. On a daily closing basis, resistance is minor at 3042 and again 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 2908, minor to decent at 2873 and at 2847. On a daily closing basis, support is minor at 2981, minor to perhaps decent at 2961/2970 and then minor to perhaps decent again at 2910. Stronger support is found at 2873.

The NASDAQ did bounce off of the 200-day MA on Thursday and Friday but the bounce was so insignificant, especially with only psychological but very minor resistance at 3000 note being able to be broken, that it suggests the index needs some positive fundamental piece of news to generate further buying. It should be mentioned that AMZN was up $15 on Friday off of its less than expected earnings report and unlikely to go much further to the upside this coming week. Without that $15 rally in that stock on Friday, the index would have closed even lower than it did and perhaps even broken the 200-day MA.

It should be mentioned that the end of the month is on Wednesday and if the NASDAQ closes below 3091 it will give a failure to follow through signal on the monthly chart. It does seem highly unlikely that the index will be able to rally 100+ points over the next 3 trading days. The last time a failure to follow through signal was given was in May of 2011 and the index generated 5 months in a row of red closes. With the NASDAQ being the established leader of the indexes during the past few years, such a chart signal would be difficult to overcome.

To the downside, the NASDAQ shows no support of consequence nearby other than the 200-day MA, currently at 2976. That support is only on a daily closing basis as a previous minor intra-week support at 2975 was broken this week when the index dropped down to 2961. Another intra-week support of minor to perhaps decent strength is found at 2946 but a drop down to that level would probably mean the index will close below the 200-day MA, suggesting that further downside would be seen. Below 2946 there is no support until the 2890 to 2910 level is reached and there you will find some weekly close support from the 50-week MA, currently at 2910, as well as from 2 previous intra-week lows, at 2890 and 2900, much like the ones at 2975 and 2946, suggesting they too could be broken. The big support has to be the previous weekly closing high from last year at 2873. A drop down to that level would certainly be plausible and maybe even probable, especially since it would keep the monthly uptrend intact (index would need to get below 2720 to break the monthly uptrend).

To the upside and looking at the weekly chart, the NASDAQ shows no resistance until minor resistance at 3085. Stronger resistance is found at 3134. On the daily chart, some very minor resistance is found between 3012 and 3028 and a bit stronger but still relatively minor at 3040. The stronger resistance is at 3085. With the probabilities being low that the index will rally this coming week and close above the 3091 level mentioned above, it does seem evident that the index will trade into November with a negative chart outlook.

The key for the week is the 200-day MA at 2976 as a close below that line any day this week would be short-term bearish. A rally and close above 3044 would be considered short-term bullish with 3085/3091 as the upside objective. It should be mentioned that the NASDAQ has not closed below the 200-day MA since January 5th. The index did break below the line intra-day on June 4th but closed above it at the end of the day, much like what it did Friday, and generated a 5-day rally off of that break. As such, Monday is likely to be important for what the index will do for the rest of the week.

The weekly chart suggests further downside will be seen this week but the daily chart leans to the upside. This scenario has often been seen in the past and usually the weekly chart prevails.

SPX Friday closing price - 1411

The SPX made a new 7-week low this past week closing below the important weekly close supports at 1425 from May08 and 1418 from August of this year suggesting that a failure to follow through signal has been given. The index closed near the lows of the week also suggesting further downside below 1403 is likely to be seen this coming week.

The SPX did manage to rally from the lows on Friday and close in the upper half of the day's trading range suggesting that the first course of action on Monday will be to the upside with the April high at 1422 as the objective. Nonetheless, a rally up to that level will keep the index in a negative condition. Having had a 32 point trading range this past week, a rally up to 1422 would suggest the index could get down to the 1390 level this coming week.

On a weekly closing basis, resistance is minor at 1433, minor to decent at 1460 and decent at 1465. On a daily closing basis, resistance is decent at 1418/1419, minor at 1437 and at 1447, decent at 1460 and decent to strong at 1465. On a weekly closing basis, support is minor to decent at 1406, minor at 1397 and decent 1370. On a daily closing basis, support is minor at 1399 and again at 1392, minor at 1366 and minor to decent at 1358.

The SPX is the only index that has not gotten close yet to the 200-day MA, currently at 1378. The probable reason for that is that the earnings reports for the financial industry have generally come in as expected or slightly better giving the traders no special reasons to sell the index, compared to what has been happening in the other indexes where some earnings reports have been strongly disappointing causing strong selloffs in some of their stocks. The index is likely to continue to underperform the other indexes for the same reason, both to the upside and the downside. Simply stated, this is not the index the traders are likely to key on.

Nonetheless, the SPX is likely to be an indicative index if the traders are able to get the index up to the 1422 to 1425 level. All this year, prior to September 6th, the 1414 to 1426 area had been strong resistance. The index had been up to that area on 5 occasions before a breakout occurred on September 6th. In addition, after the breakout happened, the index dropped down to 1425 once and then rallied up to 1464 before the breakdown occurred, meaning that 1422/1425 is considered an important pivot point. If the traders are able to get back up to that area but not able to get above it it would be considered a strong negative.

Minor intra-week support, other than psychological, is found between 1397 and 1400. Further but very minor intra-week support is found at 1386 but under that level nothing is found until 1358. The 200-day MA is currently at 1378 but that line is more important on a daily closing basis than on an intra-day basis. On a daily and weekly closing basis, the 1363 level is important support inasmuch as it was the high close for all of last year. By the same token, previous high supports are never considered more than minor to decent support. Nonetheless, it is important to note that if the SPX is able to get below the 1400 level the probabilities are high that the index will drop somewhere between 1358 and 1370.

The SPX chart suggests the first course of action this week will be a rally up to the 1422 level. Nonetheless, this is contrary to what the other indexes are saying as their charts suggest the downside will be visited first. By the same token, the SPX is likely to be more of a follower than a leader so it is unlikely the traders will using this index to make decisions, other than perhaps to evaluate the resistance above.

Important economic reports are due out this coming week with the ISM Index on Thursday and the Jobs report on Friday. Nonetheless, reports are likely to take a back seat to the election results that come out on Wednesday November 7th. By the same token, support and resistance levels are likely to be tested this coming week based on the economic news that comes out as the traders attempt to set clearly the chart parameters involved that will determine a rally or a break based on the election results.

The indexes are likely to trade within established support and resistance levels this coming week but with a high probability that both support and resistance levels will be seen.