DOW Friday closing price - 14565

The DOW generated a weekly reversal this past week having made a new all-time high and then closing in the red. Nonetheless, it was not a totally convincing reversal inasmuch as the index fell strongly early Friday (off of a worse than expected Jobs report) but then rallied during the day to close near the highs of the day and just a few points below the previous week's close, suggesting that the traders are still not convinced that the index has found a top and is starting a correction.

The DOW did generate on Friday what might end up being a spike low as well as a successful retest of the recently built triple low support between 14382 and 14404 when the index got down to 14434 and rallied throughout the day to close 130 points higher, very slightly in the upper half of the week's trading range, and only 13 points below last week's close. The spike low, the close in the upper half of the day's trading range, and the inability of the bears to break the triple bottom between 14382 and 14404 off of a very negative fundamental report has to be considered a chart positive. On a negative note though, the bulls were unable to close the index above last week's close at 14578 in spite of the fact they got the index up to 14577 just 4 minutes before the close. A green weekly close would have been considered a bull's victory.

On a weekly closing basis, there is very minor resistance at 14578. On a daily closing basis, there is very minor resistance at 14606 and minor to perhaps decent resistance at 14662. On a weekly closing basis, support is minor at 14093 and again at 13981. Below that, there is no support until minor support is found at 12938. Decent to strong support is now found at 12588. On a daily closing basis, support is very minor at 14550, very minor again at 14447 and minor to perhaps decent at 14421.

Both the bulls and the bears in the DOW can claim some success on Friday as the red daily close made Thursday's close at 14606 into a successful retest of the Tuesday's all-time high daily close at 14662. On the other side of the coin, the bulls were able to prevent a sell and failure signal from being given when they kept the index closing above Wednesdays' low daily close at 14550 as well as above the previous all-time high daily close seen on 3/14 at 14539.

The negative economic news that came out last week as well as the volatile action seen in the DOW on Friday does suggest that a correction has started. In addition, it can be said that chart-wise the high has been tested successfully on the daily closing chart and all that is needed is a sell signal to get the index heading downward on a more convincing way. A small sell signal would be given with a close below 14539 that might get the dominos falling and a stronger sell signal would be given with a break below 14382.

The action and news seen on Friday does suggests the decision could be made on Monday as a daily close below 14539 will likely tip the scales to the downside and a daily close above 14606 will likely tip the scales to the upside. Neither of these levels is of major importance but with such a fragile scenario in place (negative news but bears punch drunk) it won't take much to tip the scales in "a" direction. Having had a 172 point trading range on Friday it would be safe to assume that the action on Monday will be have a wide trading range again and that one of these levels will be broken on the close.

The probabilities favor the downside as the fundamental news has turned toward the negative and cannot be negated until the same reports come out next month.

NASDAQ Friday closing price - 3267

The NASDAQ had a wild week considering it dropped 100 points intra-week from last week's close, broke below the decent to strong intra-week support between 3200 and 3205, and pierced the 50-day MA by 32 points with the latter all happening on Friday. By the same token, on a daily and weekly closing basis the end result was not anywhere near as decisive as the actions mentioned suggest as the bulls were able to rally the index enough to close above 3200 on the same day, meaning that neither the decent to strong support at 3200 nor the 50-day MA was broken. The end result left the traders waiting for further action before committing themselves to a direction.

The negative action in the NASDAQ did turn the probability rating around to slightly favor the bears as a small sell signal was given on Wednesday when the index closed below the 4-week low daily close at 3222. The small sell signal was confirmed with 2 subsequent closes below that level on Thursday and Friday suggesting the bulls will need fundamental help to re-start the uptrend.

On a weekly closing basis, resistance is decent at 3256. On a daily closing basis, very minor resistance is found at 3213 and minor resistance at 3222/3224. Above that level, minor to decent resistance is found between 3254 and 3258 and decent resistance is found at 3267. On a weekly closing basis, support is very minor at 3244 and minor at 3183 and at 3161. On a daily closing basis, support is minor to decent between 3183 and 3200. Below that level, minor to decent support is found at 3131 and decent to strong at 3116.

The NASDAQ closed on the bottom half of the week's trading range suggesting that further downside will be seen this coming week. A break below this past week's low at 3168 will signal on the weekly chart that the 3270 high seen the last 2 weeks is indeed a top to this rally. It is already a high probability since the daily chart did give a sell signal by breaking and closing below the support at 3222, as well as confirming the break. Nonetheless, confirmation on the weekly chart is still needed before the traders turn short-term bearish.

On an additional negative note, the up-trending channel that started a little over a year ago is now a confirmed 3-point channel as the index did break an important support level due to negative news. It will now be very difficult (if not impossible) for the NASDAQ to make new highs until the reports seen this past week are reversed, which can't happen for another 4 weeks. Having 3 points on the channel also means that generating a strong rally up to and above the line will now be very difficult. With the bottom of the channel currently at 2280, it means the risk/reward ratio is now heavily in favor of the bears, therefore suggesting that there will be much more interest in selling rallies than buying dips, at least on a chart basis.

The 3200 level which includes the 50-day MA is now even a stronger "pivot point" having gotten broken intra-day by 32 points on Friday but then the break not confirmed with the late rally. Nonetheless, with the NASDAQ having closed on the lower half of the week's trading range it is likely that drops below 3200 will be seen again this coming week, suggesting the bulls will need to continue to stage rallies in order to prevent the pivot point support from getting broken.

On the other side of the coin, the NASDAQ did close near the highs of the day on Friday and some upside is likely to be seen, suggesting Monday could be a wild but decisive day. Rallies above Friday's high at 3206 are highly likely to be seen but resistance will be found at 3213 and again at 3226. If the index is unable to break above "both" of those levels on Monday, selling will likely come back strongly and the bulls will be all-out to keep the index closing above that important pivot point. Probabilities favor the bears winning this round.

SPX Friday closing price - 1553

The SPX gave a failure-to-follow-through signal on Friday having closed below the previous all-time high weekly close at 1561 seen in 2007. In addition, the index also generated a reversal having made a new all-time high and then closing in the red and in the process, giving a sell signal as well when the index closed below the most recent weekly low close at 1556. Based on the fact that all of this happened off of a couple of negative economic reports of importance does suggest the signals are valid and will be confirmed next week, which in turn would likely result in a strong correction occurring.

It should be noted that the SPX had a very similar situation in 2007 when the index went and closed above the previous all-time high at 1552 (seen in 2000) by 24 points but did not see any follow through the week after and then proceeded to fall 900 points (58%) over the next year. In this particular case the previous all-time intra-week high at 1576 was not broken (only the weekly closing high was broken) but that even sets up a more ominous chart situation inasmuch as the 1573 intra-week high seen might end up being a double top of consequence when matched up with the 2007 top at 1576.

On a weekly closing basis, minor resistance is found at 1560 and decent resistance at 1569. On a daily closing basis, there minor resistance at 1559, decent resistance at 1563 and decent to strong resistance at 1569/1570. On a weekly closing basis, support is very minor at 1515, minor at 1500/1503, and minor to perhaps decent at 1468. On a daily closing basis, support is minor to perhaps decent between 1545 and 1548. Below that, very minor support is found at 1530 and minor to perhaps decent between 1495 and 1502. Decent support is found at 1487.

The SPX had the most telling action this past week having given 4 strong clues (reversal, double top, failure-to-follow-through and sell signal) that suggest a strong top has been formed. These signals will still need to be confirmed this coming week but with no economic news of consequence scheduled that could help the bulls, the probabilities have now shifted toward the bear side.

On a positive note, the SPX did not break the low seen on March 19th at 1538 having dropped down on Friday to 1539. The possible double low was likely one of the reasons the index rallied on Friday to close 15 points off of the low. If the double low is confirmed with a rally above Friday's high at 1559, it will give the bulls ammunition with which to try to undo the negatives seen this past week.

Resistance in the SPX is now going to be decent at 1563 as that was the previous intra-week high prior to the new all-time high weekly close. Further resistance will be found at 1570. The index did close near the highs of the day on Friday and the probabilities do favor Friday's high at 1559 getting broken and the 1563 getting tested. With the double low getting confirmed if the index gets up to 1563, but facing a slew of fundamental negatives now in place, the 1563 level is likely to be a very important battle ground this coming week. If the bulls are unable to get the index above 1563, the selling is likely to come back as strong or stronger than seen on Friday. If the 1538/1539 low is broken, the traders are likely to turn bears and sell all rallies.

To the downside, the 1538/1539 level is important as buying has been seen there over the last 4 weeks. Nonetheless, the previous high seen in February and from which a mini correction of 45 points occurred is at 1530, as well as the 50-day MA, meaning that even if the double low is broken the bulls can depend on some buying being seen at that levels. As such, I would have to say that 1530 is an important pivot point this coming week.

The fundamental news that came out this past week will be difficult to overcome, suggesting the bears now have a slight edge. Nonetheless, psychologically the bulls still have the upper hand inasmuch as this year they have won all previous battles, thus keeping the bears uncertain enough to be aggressive sellers. With the volatility seen on this past week, especially on Friday, it probably won't take more than a couple of days to determine who still "carries the big stick". My belief is that the bears will now start winning the battles.

All economic reports this past week were negative, suggesting the economy is starting to weaken again. These reports came as a surprise as it was expected that the reports would continue to show slow but consistent improvement. The Fed support that has been promised for still another year or two had kept the traders secure in purchasing stocks under those conditions, but now that the economy might be regressing "in spite of the Fed support", traders might start questioning the validity of the Fed plan going forward and that would be a strong negative as there is little else the Fed can do if things get bad again.

The Retail Sales report is the only report of consequence this coming week but it does not come out until Friday. Even then, Retail Sales is generally a volatile report meaning that traders don't put much stock in what 1-month numbers show. As such, this coming week is likely to be mostly technical in nature but with a bearish bias due to the negative reports. With the important economic reports last week being quite negative and not likely to be negated until they come out again next month, the probabilities favor a correction occurring. As it is, many analysts had expected the "sell in May and go away" adage to come in a bit earlier this year due to the importance of the resistance levels in play at this time, the overbought condition that still exists, and the lack of close-by support levels the bulls could depend on.

Friday's volatile action supports the bear side even though it had a positive tinge attached to it when the indexes were able to rally substantially off of the lows of the day. Volatility is likely to continue and if it does it will definitely favor the bears. If the indexes do recover from the negative fundamental news and the bulls manage to eke out further gains "without volatility" then the probabilities will favor the bulls and further upside.