DOW Friday closing price - 13038

The DOW generated a "key" reversal making a new 53-month high and closing in the red and on the lows of the week. In addition, on the weekly chart, a double top was built with the index having closed 8 weeks ago at 13232 and at 13228 the previous week. Both of these events suggest the "sell in May and go away" adage is becoming reality as this past week was the first week of May and the action has to be considered decidedly bearish, especially since most of the highly important earning reports for the quarter are out, as well as the also important economic reports for the month.

The DOW closed on the lows of the week as well as below the always indicative 50-day MA, currently at 13065, suggesting that further downside will be seen this coming week. If that does occur, the index will be breaking below a decent intra-week support level at 13000 that has been considered a pivot point since the last week of February. Should the index generate a close below 13000, additional chart/technical selling will likely be seen, especially because of the strong seasonal tendency for the index to fall at this time of the year.

On a weekly closing basis, resistance is decent strong at 13228/13232. Above that level, no resistance is found until minor to decent resistance at 13625. On a daily closing basis, resistance is decent at 13279 and decent again between 13241 and 13264. On a weekly closing basis, support is decent between 12810 and 12849. On a daily closing basis, support is minor at 12927 and at 12849, decent at 12749, and decent to strong at 12715.

The DOW has multiple tops up between 13264 and 13297 that were broken this past week but no follow through buying was seen. The index got slightly above the "general" resistance at 13300 with a rally up to 13338 but no additional buying was seen and soon thereafter a failure to follow through signal was given. No sell signal has yet been given but the chart looks weak and with no economic or earnings reports of consequence due out this week it is unlikely that bulls will have much success in rallying the index.

Support in the DOW is found at the 13000 demilitarized zone (12970-13030) but below that there is no intra-week support until the 12896/12845 level is reached. Even then, the support there, at least on a intra-week basis, is considered minor. The stronger support is found at the double low generated a few weeks ago between 12710 and 12734. Drops down to that level will likely be seen if the 13000 level is broken on Monday. Below that level there is no support whatsoever until the 200-day MA, currently at 12190, is reached. Even then, the support at 12190 is only from the MA line as there is no intra-week support of consequence found until 11862 is reached.

It was announced on Sunday evening that the French election was won by the Socialist candidate. The reaction to that event should be negative inasmuch as the winner is anti-business and plans to withdraw much of the French support for bailout of the European banks and nations. If that happens, confidence in the recovery of the Euro will further deteriorate adding pressure to the already negative and fragile situation. In fact, the win by the Socialist candidate could be the one piece of news that causes the market to tip over to the negative side after the unconstructive chart action this past week.

To the upside, the DOW will show some resistance at the 50-day MA, currently at 13065, and again at a previous but minor intra-week high at 13135. Above that level there is no resistance whatsoever until 13232 is reached. Based on the close on the lows of the week it is likely the bulls will need positive fundamental news to reach those levels again.

The chart outlook in the DOW has turned to the bearish side with the action this past week. The bulls had the upper hand at the beginning of the week but were unable to build on that. The economic news was not bullish but it was not bearish either and yet the strong momentum to the upside that the bulls were able to muster during the past few weeks disappeared and was replaced with worry about the seasonal tendency of the market to start a short-term downtrend in May, as well as fears that the European debt will continue to implode as Spain, Italy, and Portugal seem to be heading in the wrong direction.

Probabilities in the DOW favor strong follow through to the downside generating drops down to the 12700 level before "any" buying of consequence appears. Possible trading range for the week, base on last week's trading range, could be 13038 to 12720.

NASDAQ Friday closing price - 2956

The NASDAQ had a bearish week starting with the fact that the positive classic reversal seen last week, which included a close on the highs of the week, did not receive any follow through to the upside this past week in spite of the fact that the other indexes did see a rally above the previous week's highs at the beginning of the week. In addition, the failure to follow through to the upside was particularly disappointing inasmuch as the "much better" than expected earnings reports on AMZN and AAPL did not help the index maintain any of its previous week's gains. This was especially disappointing when AAPL gave up all of its previous week's gains and AMZN showed signs that further upside will be difficult to accomplish.

The NASDAQ also accomplished two major chart events beginning with a successful retest of the 12-year weekly high close at 3091 with a close the previous week at 3069 and a red close on Friday. Such a retest is normally a chart requirement when a top to a major rally has been found. In addition, the index gave a sell signal on the weekly chart closing on Friday below the previous weekly low close of psychological importance at 3000 suggesting strongly that the previous 12-year high weekly close at 2873 will be tested this coming week.

On a weekly closing basis, decent resistance is found at 3069 and strong resistance is found 3091. On a daily closing basis, minor resistance is found between 2988 and 2991 and again between 3042 and 3055. Above that level, decent resistance is found at 3069 and strong resistance is found at the double top at 3119/3122. On a weekly closing basis, support is minor at the previous 12-year high weekly close at 2873 and then nothing until minor to perhaps decent support is found between 2616 and 2646. On a daily closing basis, support is minor at 2910 and then nothing of consequence until minor support is found again at 2746.

The NASDAQ, having been the leader to the upside during the past 4 years, led the indexes to the downside having been the first index to give a clear sell signal on both the daily and weekly closing charts. The strong exodus from the index this past week, especially with 2 of the main stocks in the index having had such positive earnings reports in the last 10 days, is indicative that traders and investors are taking profits and going to the sidelines.

Daily and weekly close support in the NASDAQ is found between the previous 12-year high daily and weekly close at 2873, as well as at a previous minor support on the daily chart at 2910. Nonetheless, previous high closes are never considered strong support and the 2910 daily close support is minor at best, suggesting that if the index has found a top and a correction of consequence is starting that those supports will not hold up.

The 50-week and 200-day MA's are always considered important lines regarding longer trends and if the NASDAQ has found a top (likely) the probabilities of those MA lines being tested is high, even in the context of the longer term bull trend still being in effect. Both of those lines are currently around the 2740 level suggesting that if the action this past week is confirmed as a short-term top that those 2 lines will be tested in the near future. Such a drop would mean about a 13% correction from the highs, which is a percentage that can easily be seen as a "correction" to the trend and not a longer term trend change.

To the upside, last week's high in the NASDAQ at 3076 is now going to be considered decent resistance. Nonetheless, the 50-day MA, currently at 3030, will also be considered resistance and if in fact the index has found a short-term top the 50-day MA should not get broken on a daily closing basis.

The NASDAQ has one additional chart event that is particularly damaging to the bulls. The index, a week ago last Wednesday, gapped up between 2979 and 3010. The gap had left an island formation that loomed as a possible strong signal that the uptrend would resume with strength. Nonetheless, the index gapped down on Friday between 3016 and 3001 and left what could also be considered an island to the downside. The previous positive island-to-be was negated turning the bullish tone to a bearish tone and now the potential island to the downside has been created that when added to the double top at 3119/3122 offers strong negative connotations to the chart. In addition, the index closed on the lows of the day/week suggesting further downside will be seen on Monday. A break below the important 8-week low at 2946 would likely bring in "strong" technical selling that would likely prevent the bulls from trying to close the island and likely thrust the stock down to the 200-day MA, currently at 2740, before any buying of consequence would be seen. Such a chart picture is going to be difficult to negate without a positive fundamental piece of news. No news of that variety is scheduled to be released at this time.

With AAPL already giving back "all" the gains generated after the much better than expected earnings report and AMZN already showing signs that the high after the earnings report has been found, there doesn't seem to be any reason the bulls can generate a rally that would negate the negative signals given this past week.

The NASDAQ does show some minor support at 2900 that may slow down the selling but if broken it is open air until 2740 is reached. The 3000 level will now be seen as strong resistance.

SPX Friday closing price - 1369

The SPX successfully retested the 4-year intra-week high at 1422 (1408 on a weekly closing basis) seen a few weeks ago with a rally up to 1415 this past week and a red close after last week's close at 1403. The index closed on the lows of the week and further downside is expected to be seen this coming week. A daily close below 1366 any day this coming week, as well as red close next Friday by 1 or more points, would give sell signals on both the daily and weekly closing charts.

The SPX shows a strong double low at 1357/1358 built over the past 4 weeks that should have been sufficient to have generated a rally above 1422 and at least up to 1440. Nonetheless, having failed to accomplish that goal now becomes a pivot point/support level that if broken would officially put the index into a seasonal correction of consequence that could generate a 10% or more drop.

On a weekly closing basis, resistance is minor to decent at 1403 and decent at 1408. On a daily closing basis, there is minor resistance at 1390, decent resistance at 1405, and strong resistance between 1409 and 1416. On a weekly closing basis, support is decent at 1370 and minor to decent at 1363. Below that there is no support until minor to decent support is found between 1268 and 1279. On a daily closing basis, support is minor to decent at 1366 and decent at 1358.

The SPX closed slightly below (1 point) the most recent low weekly close at 1370. The close was not low enough to generate a "clear" sell signal but having closed on the lows of the week the probabilities of that sell signal being confirmed next Friday with any kind of red close are high. On a short-term daily closing basis, the index only needs to close an additional 6 points lower from Friday's close to generate a sell signal of consequence on the daily closing chart. On an intra-week basis though, a drop back down to the 1357/1358 level would create a triple bottom that would likely be broken. Having had a trading range of 48 points last week and having closed on the lows of the week, a drop of only 12 points from Friday's close down to 1357 seems like a high probability.

The inability of the SPX to generate a rally or close above the May08 highs, contrary to what the other indexes have done, suggests that the financial problems in Europe, and thus in the entire world, are still the main concern. With France electing a Socialist candidate on Sunday, those concerns are likely to skyrocket this coming week giving the bears the added ammunition they need to accomplish their goals.

To the upside, the SPX now has resistance of consequence at the 50-day MA, currently at 1386 and at a minor high seen previously at 1390. A close above the 50-day MA, as well as above 1390, would ease the chart negatives that are presently in place and give the bulls the ammunition they need to generate new interest in the buy side. By the same token, if that occurs "after" a drop down to 1357/1358 is seen, then the multiple bottom scenario would continue to act as a magnet.

The probabilities are high that the SPX will break down this coming week.

The bulls gave back control this past week in spite of all the positive earnings reports that were seen over the past 3 weeks. The earnings reports were not sufficient to overcome the fears that the indexes have outpaced the continued sluggish economy and that a strong seasonal correction will occur. The remaining earnings reports due out for the next few weeks are not important or catalytic enough to generate new buying interest among traders and attention will now shift back to the world's economic problems as well as the pace of growth in the U.S.

No economic reports of consequence are due out this week but the election results in France will likely hang over the market in a negative way especially since the Socialist candidate won. Technically speaking, the action last week is likely to put the traders in a negative mode and without the possibility of good news coming out (no news of consequence scheduled) that is not likely to change this coming week.