DOW Friday closing price - 12357

The DOW started the year on a positive note accomplishing a new 6 month high in the first day of the first week of trading. The index was also able to get above a decent intra-week resistance at 12450 from April with the 12474 high seen on Tuesday that suggested that an attempt at testing the 43-month high at 12876, made in May of last year, would occur. Nonetheless, the positive feeling that was seen at the beginning of the week did not receive any follow through as the index was unable to generate any further gains during the week or even close above the April weekly close resistance at 12391, leaving lots of questions unanswered as well as doubts about the validity of the recent uptrend. This was especially puzzling after Friday's Jobs report came out much better than anticipated.

The upside momentum from the end of the year rally in the DOW has come to a halt and the index now has to depend on earnings reports that start coming out this week being generally positive to see any additional upside generated. This is especially true since the important economic reports are not due out for another 3 weeks.

On a weekly closing basis, resistance is minor at 12391, decent at 12682 and decent to strong at 12810. On a daily closing basis, resistance is minor at 12391, minor to decent at 12418/12428, minor at 12569, decent to strong at 12724 and strong at 12810. On a weekly closing basis, support is minor at 12217, minor again at 11934 and decent between 11858 and 11866. On a daily closing basis, support is minor between 12150 and 12204, minor again at 11897 and minor to decent at 11766.

Though the DOW continued the recent uptrend, disappointment was felt when the early strength seen on Tuesday dissipated at the end of the week. The index did break out of a bullish flag formation in the first 15 minutes of trading on Tuesday but by Thursday the flag was negated and the stock left to drift without much direction on Friday. Further exacerbating the situation was the inability of the index to close above the April weekly close at 12391 even though the index traded above that level for most of the week as well as most of the day on Friday. The bulls are now going to have to depend on earnings reports being positive to regenerate buying interest in the DOW. Having failed to close above the decent resistance levels this past week in spite of the momentum being positive and the week starting strong likely means that new catalysts are needed to bring in additional buying.

As far as resistance on a daily closing basis is concerned, the 12418/12426 level is likely pivotal. The DOW had a closing high on April 6h at 12426 and that high was tested successfully with a close at 12418 on Wednesday, followed by 2 red closes in a row confirmed that level has now been upped in resistance strength. As such, the traders will likely become buyers on any close above that level. Should that be seen, rallies up to the next resistance level in the low 12700's will likely occur.

To the downside, it should be mentioned that in April, after the DOW closed at 12426, the index dropped down to close at 12201 before going on to make the 12879 high. In the past 2 weeks the index has seen a couple of minor low daily closes at 12150 and at 12217, which suggests that a drop down to that area might be in the cards for Monday as the start of the earnings quarter is Monday after the close. After that, it all depends on how the earnings reports come out. Should the index close below 12150, the probabilities are high it will test the 200-day MA, currently at 11940.

In looking at the chart and not considering that the news coming out this week will be uneventful, I would say the probabilities slightly favor the DOW dropping back down to the 50-week and 200-day MA's, at 11980 and 19140 respectively. Nonetheless, earnings report week is generally unpredictable and for the most part often generating positive upside movement. The seasonal tendency is for the index to rally upward the first 3 to 5 weeks of the year, during earnings, and then generate a decent correction back down going into March. It should be mentioned that there are only 2 earnings reports of consequence the first week (AA on Monday and JPM on Friday).

NASDAQ Friday closing price - 2674

The NASDAQ could easily end up being the key index this week as it closed on Friday at a point that can be considered "short-term" pivotal. The index closed exactly at the 50-week MA, currently at 2674, and it needs to be mentioned that it has traded below that line since the first week of August (4 months), suggesting that the index is still in a downtrend and that nothing positive of consequence has yet occurred to break that trend. By the same token, since this is the weekly chart and the close is the most important, it is likely the traders will wait to see how the early earnings reports come out before deciding what to do.

The NASDAQ has been generally trendless for the last 3 months as the index closed on Friday just 7 points higher than the close the week of October 10. In addition, during this period of time the index has stayed between the 50 and 100 week MA, currently at 2674 and at 2530 respectively. There have been 2 occasions where the index "broke out" and "broke down" above and below those lines for 1 week with a rally up to 2753 the last week of October and a drop down to 2441 the third week of November, but other than that the index has stayed between those 2 lines consistently. With little fundamental information due out this week, the probabilities favor more of the same and therefore weakness to be shown due to the close at the top of the trading range on Friday.

On a weekly closing basis, resistance is minor to decent at 2706/2707, and decent to strong at 2737. On a daily closing basis, resistance is very minor at 2687 and strong between 2727 and 2738. On a weekly closing basis, support is minor to decent between 2605 and 2616, minor at 2555, decent at 2441 and at 2415 and strong at 2341. On a daily closing basis, support is decent between 2596 and 2606, minor at 2539 and minor to decent at 2518.

The NASDAQ broke above the 200-day MA, currently at 2660 on Thursday and confirmed the breakout with another green close on Friday and from the daily closing chart point of view this is indicative. By the same token, the index is only trading 14 points above the line and any "hiccup" could unravel that gain in a minute. Nonetheless, the index did make a new 7-week high daily close on Friday and if the bulls are able to generate another green close on Monday, the traders are likely to climb aboard the long side of the index. It should be mentioned, though, that the index has broken above the 200-day MA on 2 prior occasions since August but those breakouts lasted no more than 3 days before returning to trade below the line once again. As such, this breakout has to be considered with a grain of salt.

It is evident that the key this week will be the 200-day MA at 2660. Any close below the line will be considered another failure and drops down to the pivot point that has been important all year at 2600 would likely be seen. It should also be mentioned that the index did generate a second runaway gap (first runaway gap was closed 3 weeks ago) on Thursday between 2616 and 2627 and that, plus the break above the 200-day MA, have to be considered strong positives. By the same token, should the index fail "again", strong disappointment will likely be felt.

Based on the chart of the NASDAQ, I would have to say the probabilities favor the upside but only by a very slight margin. The entire index market is walking on egg shells and any kind of negative news will unravel the tenuous hold the bulls have achieved.

SPX Friday closing price - 1257

The SPX did have a positive week closing higher than the previous week and above the 50-week MA, currently at 1268, suggesting that further upside is the most probable scenario. Nonetheless, the index was not able to get above the October high at 1292 even though at the beginning of the week the index did get up to the weekly closing high from October at 1285. It is evident that the traders are still not totally convinced that the index is ready to move higher and are waiting for further news.

The SPX is likely to be an important catalyst during the next 2 weeks as financial woes continue to be one of the fears hanging over the market and most of the financial stocks do report over the next 2 weeks with JPM reporting Friday and WFC, GS, BAC, and MS the week after. With the index being able to accomplish something positive on Friday (closing above the 50-week MA), that means that the onus is on the shoulders of the bears to show cause for the index not to go higher.

On a weekly closing basis, resistance is decent at 1285. Above that level there is decent resistance again at 1343 and strong at 1363. On a weekly closing basis, support is very minor at 1257, minor at 1219, decent at 1158 and at 1131 and decent to strong at 1123. On a daily closing basis, support is minor at 1265, minor to decent between 1249 and 1256 and minor to decent again between 1212 and 1218. Below that, no support is found until decent support at 1158.

As I mentioned last week, the SPX has been trying to establish itself above the 200-day MA, currently at 1260, for the last 5 months but other than very short 1 to 2 days rallies above the line had been unable to do so. Nonetheless, the index did close above that line a week ago Friday and closed above the line all last week, breaking the previous pattern of reversing the breakout within a couple of days. This looks like an important clue as to what the traders are thinking as the pattern was broken, suggesting that further upside is likely to be seen unless some unexpected negative news comes out.

Nonetheless, the 1285 level, on both a daily and weekly closing basis, is still considered resistance of consequence. That level was seen on Tuesday and rallies up to 1283 and 1281 were seen on Thursday and Friday and though the index failed to get above that level it has not backed off much either, once again suggesting that the probabilities favor the upside. If the SPX is able to close above 1285 there is a lot of open air above until the 1330 level is reached. Psychological speaking, and from 1 or 2 previous minor rallies, the 1300 level will offer some resistance but not likely enough to prevent the index from moving up to 1330-1345 soon thereafter.

To the downside, the 1250-1256 level is now an important support as the SPX showed strength last week closing all week above the 200-day MA and only by breaking below 1250 will that strength be dismissed.

It is also important to note that the SPX generated 2 inside months in November and December but now that has changed as the index has broken above both of those highs. Such action has to be considered a positive until proven otherwise.

The news scheduled for this coming week is not likely to help or hinder the SPX so based on the technicals I would have to say the index will either do nothing of consequence or go higher. Weakness is not one of the options, unless unexpected bad news comes out.

The indexes are facing another uneventful week as there is little scheduled in the way or economic or earnings news that will stimulate strong movement in either direction this coming week. By the same token, the short-term outlook (3-5 weeks) suggests the indexes will move higher overall. This too, is a seasonal tendency as the beginning of any earnings quarter generally tends toward the bull side. There are no indications at this time that this year will be any different.

Retail Sales, coming out on Thursday morning, is the only possible catalyst this coming week and even then it is a report that is generally considered second tier. By the same token, traders will be carefully analyzing that data as it was reported that Black Friday was the best ever and it is possible that this report could carry a bit more impact than others seen in the past.

Earnings will likely be the story for the next 3 weeks but most of the impact will likely be felt the week after next as that is when a large portion of the important companies report. Expect continued support for the indexes at this time.