DOW Friday closing price - 12660

The DOW had a reversal week making a new 8-month high but closing in the red. In addition, the index did get up close enough to the previous high at 12875 seen in May (got up to 12841) that it can be said a double top may be forming. If the index is able to get below this past week's low at 12580 and not rally above 12841 this coming week, a double top will be formed giving that resistance level additional strength. In addition, the index closed below the most recent previous weekly closing high at 12681, suggesting that a failure to follow through might also occur if the index closes in the red again next Friday.

With quite a few of the top stocks in the DOW having reported earnings this past week, some of which were better than expected (such as IBM), it is getting harder for the bulls to keep the upside momentum going as the possibility of news good enough to bring forth new buying continues to shrink. The index is also getting into a seasonal period of time between the last week of January and the first 2 weeks of February when a correction of consequence generally begins. With this past week's negative action the probability that the index has found at least a temporary top to this rally has increased.

On a weekly closing basis, resistance is minor at 12720 and decent to strong at 12810. On a daily closing basis, resistance is minor to decent at 12724, minor to decent again at 12756, and decent to 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 at 12584 and again at 12480. Below that, there is minor to perhaps decent support between 12355 and 12359. Below that, minor support is found between 12150 and 12204.

On the daily chart, the DOW did confirm the negative reversal seen on Thursday with a second red close on Friday. The index did close near the lows of the day on Friday and further downside should be seen on Monday with 12580 being an important short-term support. A break below 12580 would not only make 12841 into a double top on the weekly chart but would also break the 6-week string of higher lows than the previous week. Such an event is important because below 12580 no support on the weekly chart is found until the 12000 level is reached. It should also be mentioned that a break below 12580 would also be a break of the 100 60-minute MA which has not been broken since December 20th and only broken once for 4 days since November 30th, and would suggest a drop down to the 200 60-minute MA, currently at 12380, would occur.

If 12580 is broken, support in the DOW on the daily chart is found at the 12296/12311 level and a bounce from that level, probably back up to 12580, would likely occur before further deterioration down to 12000 would be considered. Nonetheless, it is evident that 12580 is a very important support level and pivot point this coming week as every chart seems to have some meaning attached to that level, with the index having closed on Friday only 80 points from that level, the possibilities of a break occurring this coming week are high.

To the upside, the DOW should test the 8-month high made on Thursday at least once this coming week before heading lower. Rallies up to the 12764 to 12776 should be seen at some point. If the 12580 level of support has not been broken prior to the rally then it is still possible the index will be heading higher with the 12875 still as the upside objective. During the first 3 weeks of earnings quarter choppy action such as this can often be seen, as such the possibilities of higher numbers for the immediate term still exists even though last week's action suggests a top has been found.

In looking at the possibilities of the 12875 level getting broken, rallies up to the 13000 demilitarized zone (12970-13030) would be expected. Nonetheless, this is the third week of earnings and most of the important reports have already come out, making the possibilities of such a move up low.

The DOW had a 261 point trading range this past week and it is unlikely the index will see much more than that this coming week, though the following week might be different. Considering that the possible high for the week might be 12765, a 261 point trading range would suggest the low for the week could be 12500. That level has to be considered a minor psychological support but one that could hold up for 1 week.

NASDAQ Friday closing price - 2816

The NASDAQ did keep its recent uptrend intact with another new 6-month intra-week and weekly closing high. Much of the rally in the index, and divergence from what happened in the DOW, was due to very positive reports on AAPL and on NFLX (two of the main components) that jumped up well over 10% in value after the reports came out. Nonetheless, in spite of those great reports the index was not able to get above the minor to decent resistance at 2840, having gotten up as high as 2834 this past week, suggesting that in spite of the positives there is still a very high probability the index is in a topping out mode and may have seen that top this past week.

The NASDAQ does show a mountain of resistance between 2834 and 2887 and with 3 of the 4 big names in the index having reported earnings it is unlikely that the one remaining stock (AMZN), reporting Tuesday after the close, will cause the index to break above that resistance without the help of the other indexes. The NASDAQ did close near the highs of the week, contrary to the other indexes which closed near the lows of the week, and further upside could be seen, perhaps up to the 2840 level. By the same token, having closed at 2816 even if AMZN comes in as bullish as the other 2 stocks did, they were only successful in adding about 10-20 points to the value of the index, certainly not enough to cause the 2834-2840 level to break. As such, the index truly needs help from the entire marketplace to go substantially higher.

On a weekly closing basis, resistance is decent at 2833 and at 2858 and strong at 2873. On a daily closing basis, resistance is very minor at 2818 and decent at 2833. Strong resistance is found between 2858 and 2873. On a weekly closing basis, support is minor to decent between 2605 and 2616. On a daily closing basis, support is minor 2800/2805 minor again at 2763 and at 2737, minor between 2710 and 2722, and decent between 2596 and 2606.

The NASDAQ continues to be in an overbought condition with 7 out of the last 9, 5 out of the last 6, and the last 4 weeks in a row of green closes. The index is also now near an area of great resistance between 2861 and 2892 that has been in place since Jan 1999 (1999 high was 2892, 2007 high was at 2861, and 2011 high was at 2876). In 2007, the last time the index got up to the highs seen in 1999 level, it rallied 11 weeks (9 out of 11 weeks in the green and 5 in a row) and then proceeded to drop down over 700 points in the following 4 months before bottoming out. The 2007 rally was in the midst of an "established" bull market where economically the sky was the limit, contrary to the fundamental make-up of the current economic situation. As such, the probabilities of the index being able to break above the established resistance have to be considered low.

Nonetheless, the bulls have placed themselves in a position with this rally that forces them to make new highs or go down in flames. Over the past 3 years, since the major bull-run started, each attempt in the NASDAQ at breaking the previous rally high (3 of them) ended up successfully. If this rally fails to accomplish a new high above the previous high at 2876, it will be seen technically as a major failure and as a sign that the bulls will not even try it again for some time (likely more than a year). Such a sign would likely turn the technical traders into major sellers on any rallies, effectively putting a cap to the mid to long term future. As such, the following couple of weeks have to be considered as crucial and important as they can be.

One of the biggest problems the bulls face in the NASDAQ is that there is no established support level near-by. The index has moved up in a straight line upward and the first strong "recent" support is down where the rally started at the 2500 level. Even in looking at the past history of last year, the nearest support level of consequence is down at the 2600/2616 level and a drop back down to that level before making a new 11-year high would be considered a failure to make a new high, effectively accomplishing what the bulls fear. As such, the bulls are committed to continue to uptrend without a pause and with a lack of fundamental strength, an overbought condition, and a major 11-year resistance level, the task is epic and unlikely to be achieved.

AMZN reports on Tuesday after the market closes and it is the last of the 4 major stocks in the index that usually have some impact. GOOG disappointed and looks to head lower while AAPL is already into a new all-time high at least 10% above its previous high and unlikely to go substantially higher, at least not in the short-term. NFLX did report much better than expected earnings and finds itself close to 25% higher than just prior to the report and though further upside is still possible and maybe even likely, it is unlikely that more than an additional 20-25% rise in price will occur. With these 2 stocks having reported earning this week and having moved up aggressively, the NASDAQ was only able to go up 50 points in value or less than 2% appreciation. As such, having closed at 2816 on Friday, to get above 2876 the index would have to rally an additional 2.5% in value to accomplish new highs. Probabilities do not favor that happening even if AMZN comes in much better than anticipated.

Resistance in the NASDAQ continues to be 2840 and minor support is between 2743 and 2766. Probabilities do favor further upside this week with 2840 as the high and 2773 as the low. Any divergence from this probable trading range could be indicative.

SPX Friday closing price - 1316

The SPX was able to generate another green close, unlike the DOW, but only did it by 2 points and only because of a late rally on Friday in the indexes. By the same token, the index did close in the lower half of the week's trading range suggesting that the probabilities do favor the downside slightly this coming week. The SPX did get up to the first resistance level of some consequence at 1330 with a rally up to 1333, which does effectively fulfill the technical requirements that the recent rally had imposed. The index does have some room to the upside for further appreciation as the stronger resistance is at 1343 but having gotten up to 1333 the bears no longer feel the compulsion to wait for that level to be reached if technically the index starts heading lower.

The fundamental picture in the SPX has not changed much but if any, it is probably more to the negative than the positive inasmuch as Greece continues to run into severe problems in obtaining further loans to pay its bills and default probabilities have increased. European banking officials have had plenty of time and opportunities to offer additional information and plans for funding but none have been offered, creating the belief that no additional funding will be seen. With all the big financial companies having reported earnings already, there seems to be little in the way of positive fundamental outlook to help the index continue higher.

On a weekly closing basis, resistance is decent at 1343 and strong at 1363. On a daily closing basis, resistance is minor at 1330, decent at 1343/1345, and decent at 1353. Strong resistance is found at 1363. On a weekly closing basis, support is decent at 1268, minor at 1257, and decent again between 1216 and 1219. On a daily closing basis, support is minor to decent at 1305/1306, very minor at 1289 and the nothing until decent support is found between 1249 and 1256.

On the daily chart, the SPX generated a reversal day on Thursday having made a new 6-month intra-week high but then closing in the red and near the lows of the day. That reversal was confirmed on Friday with another close in the red suggesting that a top has been found and that further downside is expected to be seen this week. Minor to decent support, on a daily closing basis, will be found at 1305/1306 and intra-week at 1294. A break of those 2 levels would be seen as a clear indication that a top to this rally has been found.

To the upside, this past week's rally at 1333 will now be seen as minor to perhaps decent resistance. Nonetheless, decent resistance will be found at 1343/1345 if 1333 is broken. As such, the bulls face difficult obstacles even if able to negate this past week's reversal on the daily chart. Further resistance of consequence will be found all the way up to 1363.

Last week's low in the SPX was 1306 and that level could be in play as early as Monday. With the index showing higher lows the past 6 weeks, if the previous week's low is broken it will be one further sign, perhaps even a strong one, that the index has topped out.

The bulls had the opportunity to accomplish something of consequence this past week with the extremely positive reports on AAPL and NFLX, but they were unable to get it done when it needed to be done. The GDP Adv on Friday was disappointing coming in lower than the 3.1% that was anticipated (came in a 2.8%) and with an index market that has moved up greatly in anticipation of a strong quarter, such news was a wake-up call that things are not as rosy as the action recently has suggested. In addition, this quarter has shown more red earnings reports than any quarter has shown for the last 3 years, and that is not good news for the bulls.

This coming week, though, has quite a few important economic reports with the ISM Index and the Jobs number due out Wednesday and Friday, respectively. In addition, other important reports such as Consumer Confidence, manufacturing as well as housing data, and income and spending information will be released, making this week a do or die situation for the market. Further disappointing results, in addition to a still overbought market and a seasonal correction period ahead, will likely bring about some aggressive selling by both profit-takers and bears.

Fundamentally speaking, the outlook for the year remains subdued, even by the normally rosy standards of the Fed. With that kind of an outlook and the indexes at levels of decent resistance, and in the case of the NASDAQ of major resistance, it is highly unlikely the bulls will be able to pull a "rabbit out of the hat" and keep the recent rally going. A seasonal correction which normally starts between the last week of January and the second week of February looms ahead and when added to the inability of the bulls to make a statement this past week suggests that this coming week will be the last gasp effort to the upside, and only then if the economic reports are better than expected. Probabilities do not favor that scenario.