DOW Friday closing price - 13009

The DOW was able to put a stop to the recent downtrend closing 421 points higher than last week's close making the previous week's low at 12471 and close at 12588 into a successful retest of the 100-week MA, currently at 12430. The 100-week MA has only been broken once in the last 2 years (happened last year between Aug and Oct for 6 weeks) and has been a strong indicator of trend since Nov09, having been tested successfully on 5 different occasions including the last one. The successful retest of that line this past week does suggest that the index is still on an uptrend and that the recent move down was just a correction that has run its course.

The DOW closed above the 50-week MA, currently at 12910, on Friday and closed on the highs of the week suggesting that further upside will be seen this coming week with 13338 as the likely target. If the index is able to confirm the break of the line with another close above the line next Friday it will mean that the possibility of a downtrend at this time has evaporated and that the index is either in a sideways trend or renewing the uptrend.

On a weekly closing basis, resistance is minor at 13090 and decent again between 13232 and 13276. On a daily closing basis, there is minor resistance at 13115 and decent resistance between 13252 and 13276. On a weekly closing basis, support is minor at 12849 and at 12777 and decent at 12588. On a daily closing basis, support is minor at 12878, decent at 12710, and decent to strong at 12542.

The DOW was able to close on a strong bullish note on Friday as not only was the 50-week MA broken but the 200-day MA, currently at 12995 was broken as well. It was evident on Friday that the bears had run out of ammunition as several decent intra-week and intra-day resistance levels were broken, as well as the close on the highs of the week suggesting that further upside will be seen this coming week. Nonetheless, some caution should be exercised as Black Friday has generated a strong rally 80% of the time since 1955 but normally it is a rally on low volume as most of the traders take the entire holiday weekend off.

To the upside, the DOW shows no intra-week resistance until the 100-day MA, currently at 13135, is reached. At that same level there are 2 other intra-week highs of some (but not great) consequence at 13131 and 13128 that gives that area a high probability of being reached but some indicative power as to whether the rally was for real or just a holiday rally that will fizzle out. The index is highly likely to reach that level this coming week based on the spike up rally and close on the highs of the week but if the area does stop the rally and the index then falls back and closes below the 200-day MA, disappointment will be felt. Consider the 200-day MA an important pivot point this coming week.

Further resistance above 13135 is not found until the highs from Mar/May between 13289/13338 are reached and that resistance is decent to probably strong. That area also includes the 50-day MA, currently at 13250. A break above that area will leave the 5-year high resistance at 13661 as the only resistance left. Nonetheless, based on the fact the Fiscal Cliff is still an uncertainty, It is unlikely that at this time the index will be able to break above 13338 and get up to the year's highs.

To the downside, the DOW has no support until the 12700/12778 area is reached. If the index is able to get up to 13135 on Monday, some support will be found the rest of the week at the bottom of the demilitarized zone at 12970. Nonetheless, that level will not be of much importance on Monday. Below 12700 there is no support until the recent low at 12477 is reached.

The big question this coming week is how high the DOW can rally off of what happened last week. The index 3 weeks ago generated a negative reversal week of some consequence based on the fears of the Fiscal Cliff happening. The high that week was 13290 and if the index is able to get above the 13135 area, the probabilities will be high that 13290 will be broken and 13338 will be seen.

It should be noted that from a purely chart point of view both the bulls and the bears are building a chart formation that could be strongly decisive once the Fiscal Cliff is addressed. For the bulls, the successful retest of the 100-week MA and the break above the 50-week MA does suggest that the uptrend could resume with the all-time high at 14198 as the objective, if and when the Fiscal Cliff is resolved positively. For the bears this rally could be the right shoulder of an Head and Shoulders formation with the left shoulder being the 13338 high seen in May, the head would be the 13661 high seen in September, and the right shoulder would be the high seen on this rally. Under that scenario, a break below the recent low neckline at 12471 would give a downside objective of 11281. It should be noted that the 200-week MA is currently at 11140, making that objective fully viable.

Expect the DOW to trade higher for the next couple of weeks with a good probability of 13338 being reached. Nonetheless, everything after that will be fully dependant on what compromise is found between the Republicans and Democrats.

NASDAQ Friday closing price - 2966

The NASDAQ ended the recent 6-week streak of red weekly closes by closing firmly in the green, 113 points above last week's close, and on the highs of the week suggesting that further upside will be seen this coming week. Like with the DOW, the NASDAQ also generated a successful retest of the 100-week MA, currently at 2815, with a drop last week to 2810 (weekly close at 2853) and a green close this past week. In addition, the index closed above the 50-week MA, currently at 2940, also suggesting that the recent correction is over and that the uptrend could resume.

The NASDAQ generated a breakaway/runaway gap formation this past week with a gap on Tuesday between 2859 and 2884 and a gap on Friday between 2928 and 2940, which if confirmed with a close on Monday above the 200-day MA, currently at 2985, would likely stimulate quite a bit of additional chart buying.

On a weekly closing basis, there is minor to decent resistance at 3000, decent at 3091 and strong at 3179. On a daily closing basis, resistance is minor at 2976 and at 2988. Above that level, there is minor resistance at 3020, minor to decent at 3122 and at 3149, and strong at 3183. On a weekly closing basis, support is minor at 2908 and decent to strong at 2853. On a daily closing basis, support is minor at 2910 and at 2854 and decent to strong at 2836.

This NASDAQ reversed the recent downtrend and was able to break above 2 intra-week resistances at 2870 and at 2930, finishing out the week near 2 other levels of stronger resistance at 2976 and at 2987. The 2987 level is particularly important as it includes the 200-day MA that will need to be broken in order for the index to erase the downtrend it has been on. A break above 2987 will likely take the index to the next resistance level at 3033 which also includes the 50-day MA. Above that level 3112 would be the next level the bulls will shoot for. A rally up to 3130 would close the runaway gap to the downside and would probably generate enough buying to take the index up to close the breakaway gap between 3178 and 3180, which in turn would likely mean the 14-year high at 3196 would be tested and likely broken as well. Probabilities do not favor such a rally happening, though a break above 3033 would likely give enough chart ammunition to the bulls to generate a rally up to last year's high at 3134.

To the downside, the NASDAQ the 2946 level has now become important. There is a previous intra-week low of some consequence from April 23rd at that level as well as the runaway gap that was generated on Friday between 2928 and 2940. A break below 2940/2946 would likely cause the runaway gap to be closed and the breakaway tap between 2859 and 2884 targeted. A closure of both gaps would likely take the index back down to at least the 2839 level and a retest of the recent low at 2810.

The key this coming week in the NASDAQ will be the 2987-3000 area. A close above the 200-day MA would be a strong short-term positive and would likely turn the sellers into buyers. The NASDAQ has decidedly been the leader to the upside during the past 4 years and if the uptrend is returning, it is likely the index will lead the way up.

Chart-wise, the weekly chart suggests the NASDAQ will be moving back up to test March's high weekly close at 3091. Like the DOW, the index is also building what could turn out to be a Head and Shoulders formation with the left shoulder at 3091 (intra-week at 3134), the head at 3183 (intra-week at 3196) and the right shoulder whatever high is generated on this rally. The neckline would be last week's close at 2853 (2810 on an intra-week basis). Should the neckline be broken, the downside objective would be 2424, which is also about where the 200-week MA is located (currently at 2465).

It is not likely that any of these scenarios will be decided this coming week or even this coming month as the market is waiting for resolution on the Fiscal Cliff. Nonetheless, it is also evident that something likely dramatic will occur right after the Fiscal Cliff is addressed and the possible scenarios include a strong rally or a strong drop.

For this next week, the NASDAQ is likely to see 3000 as well as see 2946. By the same token, the chart does suggest that further upside will be seen at the end of the week and that the index is back on the way to testing the high earlier this year at 3134. Nonetheless, if the index is unable to close above the 200-day MA on Monday or Tuesday, the swing will turn to the other side and a drop down to 2900 could be seen. Probabilities favor the upside.

SPX Friday closing price - 1409

The SPX has been the leader to the upside the last couple of weeks and it was most evident this past week when the index closed above the previous high weekly close seen in March at 1408, at a time when none of the other indexes came close to accomplishing the same feat. The strength seen in the SPX does suggest that there is some strength behind this rally as this index has been the "whipping boy" during the past 4 years and it leading the market now suggests that money is flowing back into the financial industry.

The SPX closed on the highs of the week and further upside is expected to be seen this coming week. Having had a 50 point trading range from the lows to the highs and now the 1397/1400 level likely to act as decent support, it does suggest the stock could get up as high at 1447 and test the 5-year high at 1474 that was made just 10 weeks ago. It should be noted that the index tested the 50-week MA successfully (did not break it convincingly as the other indexes did) with a close last week at 1359 (just 6 points below the 50-week MA) and a green close on Friday. The inability of the bears to generate a strong break of the 50-week MA does support the idea that the uptrend is still very much in effect.

On a weekly closing basis, resistance is minor at 1418, minor again at 1433, and decent to strong between 1460 and 1465. On a daily closing basis, resistance is minor to decent at 1418/1419, minor at 1428, and decent to strong between 1460 and 1465. On a weekly closing basis, support is minor at 1406 and 1397, minor to decent at 1370, and decent at 1359. On a daily closing basis, support is minor to decent at 1399, minor at 1392, and decent between 1353 and 1358. Additional decent support is found at 1343.

The SPX did break the 200-day MA, currently at 1383, a week ago Wednesday. Nonetheless, the break of the line only lasted 4 days and on Tuesday the index closed above the line again, followed by 3 additional closes above the line the rest of the week. Having negated the break of the line as well as confirmed the negation, the index should move higher this coming week.

Resistance in the SPX will start to be seen between 1422 and 1426 as those two levels have been previous intra-week highs of some consequence (March 30th at 1422 and August 21st at 1426). In addition, the 50-day MA is currently at 1426, giving that area added resistance strength. Nonetheless, getting up to that level this coming week is highly probable. What happens at that level will likely decide if the bounce is over or not. It should be noted that the index has been showing a string of lower highs and lower lows signifying that the index is in a short-term downtrend. That downtrend has not been yet negated as no previous high has yet been broken. The most recent previous high in this string is at 1434 which is also were a double high does exist (1434/1433). As such, if the index is able to get up to 1426 the bulls may try to break the downtrend by simply rallying the index an additional 8-10 points.

The 200-day MA at 1383 is definitely a key level of support in the SPX right now as a close below that line again would likely turn the technical traders into sellers. Nonetheless, it must be remembered that an intra-week break does not mean a break has occurred. The index needs to close below the line to generate a break, and then confirm it with a second close. There is some minor support at 1373 and stronger support at 1357/1358.

The probabilities favor the SPX moving up to the 1422/1426 level this coming week but after that it will depend on what the traders believe will happen regarding the Fiscal Cliff. If 1434 is broken, it is likely the index will be trading sideways between 1400 and 1450 for the next 4-6 weeks. If the index fails at 1422, the bias will be to the downside for the same period of time.

The Fiscal Cliff fears have run their course and the seasonal tendency to generate a mild but clearly evident Xmas rally is now "in vogue". Democrats and Republicans are talking about some compromise that will prevent the Fiscal Cliff from occurring and for now that is sufficient to keep the sellers at bay. Nonetheless, the problem has not yet been resolved and will remain as a strong undercurrent for the next 6 weeks.

The indexes generated a strong rally this past week that could be mostly based on a lack of volume, low participation, as well as an oversold condition. This coming week it will be seen if the rally has some teeth or was simply a holiday occurrence. There are a few economic reports of some consequence coming out starting with Durable Goods and Consumer Confidence on Tuesday, second estimate of GDP as well as Initial Claims on Thursday, and Chicago PMI and Personal Income and Spending on Thursday. I doubt that any of these reports will be catalytic as the key issue for now remains the Fiscal Cliff. Nonetheless, if any of the reports is way out of line I am sure some small changes in the action will be seen.

It is expected that last week's end of the week strength will continue, at least for the first part of the week. After the first couple of days of trading, the rest of the week will likely be calm and directionless. Trading during the Xmas holiday season tends to have a slight upward bias but generally sleepy kind of trading. Fireworks will start in January.