DOW Friday closing price - 15425

The DOW had a strong negative week in spite of the fact that the economic reports continue to come in better than expected. Fear that the Fed will start to cut the stimulus program in the near future was the pervading factor this past week as the targets the Fed has given for starting a pullback continue to get closer, meaning that every day there are less reasons to continue pumping huge amounts of money into the economy. With the indexes likely to have surpassed price levels that can be supported without Fed help, profit taking was the order of the week.

The DOW did close on the lows of the week and further downside is expected to be seen, especially since there are no scheduled economic reports of consequence this coming week that could act as a catalyst to prevent further downside. Last month's FOMC meeting minutes are due out on Wednesday but it is highly unlikely there will be any new announcement from the Fed that would stem the tide without first reaching levels of chart support that will stimulate new buying.

On a weekly closing basis, minor to decent resistance is at 15354, and decent resistance at 15658. On a daily closing basis, minor resistance is found at 15318, decent at 15409, minor again at 15604 and decent to perhaps strong at 15658. On a weekly closing basis, support is decent at 14799. On a daily closing basis, support is minor at the 15000 demilitarized zone (14970-15030), and strong at 14659.

The DOW chart is giving signs that the uptrend may be over as this last rally to new all-time highs was the shortest lived rally of all, having lasted only 6 weeks before the previous high weekly close was negated. In the past 21 months there have been 3 new multi-year highs made and the one that was the shortest-lived previously was 15 weeks. It is evident by this fact that the buying interest has waned substantially and that the traders are considering the uptrend may be over. It should also be mentioned that since this last uptrend on the weekly chart started, back in October 2011, the index has seen 5 waves and using the Eliot Wave theory, 5 waves is normally the most that will be seen before a short-to-mid-term downtrend begins. There is a possible question mark as to whether there have been 4 or 5 waves but either way the action seen does suggest that some form of major top is being built (or has been built already) and that some form of downtrend of consequence will shortly begin.

The DOW did close on the lows of the week and further downside is expected to be seen this coming week with 14844 as the likely objective. On a weekly closing basis, the 14799 level of support is very important as that has been the spike low close for the past 16 weeks and a close next Friday below that level would be a sell signal on the weekly closing chart, which has not occurred since August 2011. Such a close would certainly suggest that at least a mid-term top has been found and that a mid-term downtrend has started. With the bulls unable to generate any kind of buying this past week and no fundamental help likely to be seen, the probabilities favor the bears trying to take the index down to test the 14844 level of support.

To the upside, the DOW will now face decent intra-week resistance at 15521 and minor to decent resistance at 15340. On a weekly closing basis, those levels are 15354 and the area between 15254 and 15318, respectively. On a shorter-term basis, the 15083 (high seen July 1st) to 15100 (100-day MA) will be seen as minor resistance this coming week.

To the downside, the DOW shows some minor intra-week support at 14953, decent support between 14844 and 14858 and strong support at 14551.

The DOW closed below the 100-day MA on Friday, currently at 15100, and if that close is confirmed with another red close on Monday it will be a cause of concern for the bulls. The 100-day MA has been a very important trend indicator this year inasmuch as it has not been broken on a daily closing basis not even once since January 2nd when the line was first broken to the upside. The line was punctured to the downside on intra-day basis on June 24th but a strong rally ensued at the end of that day and the index closed above the line. The fact that the index closed below the line on Friday does suggest that this drop seen this past week is much more serious than any other drop seen this year. The bulls have a tough task ahead of them this week since there was no palpable buying interest seen this past week. With no economic news of any consequence scheduled until Wednesday, it is difficult to imagine where the bulls will find enough buying to stem the tide, at least at these price levels.

The first course of action for the DOW this coming week will likely be a drop down to the 15000 demilitarized zone (14970-15030). It is unlikely the bears will be very successful in closing the index below the 14970 the first 2 days of the week as the traders will be wary of the Fed FOMC minutes announcement on Wednesday, with the bulls hoping that Bernanke will once again nix the idea that the Fed is ready to begin to curtail the Stimulus program. Nonetheless, if no such announcement is made Wednesday afternoon, the probabilities will favor the index dropping down to 14844 where some chart buying is likely to be seen.

The probabilities favor the DOW trading down to 14844 and then closing out the week around the 15000 level. A possible trading range for the week is 14844 to 15100.

NASDAQ Friday closing price - 3602

The NASDAQ had a negative week and a close on the lows of the week suggesting further downside will be seen this coming week. Nonetheless, the index continued to outperform the DOW and the SPX, inasmuch as it fell 1.6% in value while the other 2 indexes fell close to 2.5% in value, leaving doubts that the top of the uptrend has been found in the market since the selling was not concentrated on the stocks most bought recently. On the other side of the coin, it is difficult to rely heavily on fact the NASDAQ outperformed the other indexes this past week as AAPL rallied $35 on news and the stock signifies 12% if the value of the index, meaning that if that 1 stock had not rallied, the index would have been down 2.6% in value this past week.

The NASDAQ has not yet given a failure to follow through signal as the previous multi-year high weekly close at 3498 was not broken on Friday. In addition, the index continued to be in a position to make new 13-year highs as late as last Wednesday, trading only a few points below last week's high at 3694, likely meaning that if it wasn't for the other indexes heading lower, the NASDAQ might have ended up making yet another new multi-year high this past week. Once again, a lot could be attributed to the strong rally in AAPL, but other stocks in the index such as GOOG, PCLN, NFLX and AMZN did not break down either, suggesting that there is still buying interest at this time.

On a weekly closing basis, there is minor to perhaps decent resistance at 3689 and then no resistance until decent resistance is found between 3860 and 3887. On a daily closing basis, there is very minor resistance at 3611, very minor again at 3654, minor to decent at 3684 and decent at 3692. On a weekly closing basis, support is very minor at 3587, minor at 3498 and decent at 3357. On a daily closing basis, support is minor at 3579, minor again at 3505, and minor to decent at 3400. Decent to strong support is found at 3320.

The NASDAQ gapped down on Thursday between 3668 and 3626 and followed through slightly on Friday with another red daily close as well as a close on the lows of the day/week, meaning that the possibilities are decent that the index will gap down again on Monday. If that scenario occurs, a breakaway/runaway gap formation will have been formed, strongly suggesting that a top has been to this rally has been found. If all of those factors occur and the index breaks below the 5-week low at 3573, it could generate a run to take profits by the bulls as well as new short positions being instituted.

It should be mentioned as a small chart fact, but one that could be significant, that the NASDAQ spent 3 weeks in the latter part of July trading between 3573 and 3624 before breaking out and going up to the 13-year high at 3694. On Thursday, the index gapped down at 3626 and was unable to generate any rally above that level on Friday, having seen a high of 3621. With the 3624 level having been a decent resistance level prior to the recent run-up, it stands to reason that with the gap being at 3626 that the bulls are going to have a hard time getting above that area (3624-3626) without some new positive fundamental piece of news. If the bulls are successful in getting above that level, much of the selling pressure will abate.

To the downside, the NASDAQ has minor to decent support at 3573, minor support at 3552 (gap area to the upside between 3522 and 3552) and minor support again at the previous 13-year high daily close at 3502 (3498 on a weekly closing basis). Below that level, there is little support until the mid to low 3400's are reached.

To the upside, the NASDAQ shows minor resistance between 3624 and 3626 and then nothing until the previous low daily close at 3654 is reached. Decent to perhaps strong resistance will now be found at the double top now in place on the daily chart at 3691/3694.

The NASDAQ is once again likely to be the most important index this coming week. To begin with, the NASDAQ has a small trading range area between 3573 and 3626 that if broken in either direction is likely to be indicative. With the index closing on Friday at 3602, it is exactly in the middle of that trading range, meaning that the traders closed out the week evenly split as to whether the index would rally or fall this coming week. In addition, with such a small trading range the probabilities are high that some kind of break will occur and with the traders eagerly seeking some clarity to what is happening, it is likely that the NASDAQ will be the index to watch.

It is hard to imagine a scenario where the NASDAQ will break aggressively without some catalyst occurring, especially with all the important stocks mentioned above still looking positive. As such, the probabilities do favor the bulls this week. By the same token, traders are usually speculating on what will happen 6-9 months down the line and if any additional clues are given that the Fed is going to start curtailing the Stimulus program, then the traders will become sellers.

SPX Friday closing price - 1655

The SPX took a big fall this past week breaking below the 5-week low on Wednesday and closing below the 50-day MA, currently at 1657, for only the second time this year. The previous time that the index closed below the 50-day MA, it continued on down to the 100-day MA, currently at 1630, before any buying was found.

The SPX also gapped down on Wednesday between 1684 and 1679 and that is only the second time that has happened in the last 12 months. The last time the index gapped down it fell 64 points before support was found. The index has only fallen 27 points from the gap area, suggesting that if the same thing happens this time around, that the index will get down close to the 1615 level before buying appears.

On a weekly closing basis, there is minor resistance at 1692 and decent resistance at 1709. On a daily closing basis, there is minor to perhaps decent resistance at 1669, minor to decent gain at 1697 and decent at 1709. On a weekly closing basis, support is minor at 1630 and decent at 1592. On a daily closing basis, support is very minor at 1649, minor to decent between 1609 and 1612, and decent at 1573.

The SPX closed on the lows of the week after having dropped 44 points during the week, suggesting that not only further downside will be seen this coming week but perhaps of consequence. On the intra-week chart, the stock shows no intra-week support until the 1600 level is seen, meaning that if the bears decide to push down hard that the bulls have no closer level of support they can depend on to stop the fall. The daily chart does show some minor support around the 1635 level that does include the 100-day MA that is currently at 1630, giving that level some strength. Nonetheless, if the stock is unable to generate any rally during the week, Friday's close at 1655 would suggest the index could drop all the way down to the 1611 level before finding any decent buying.

Like with the other indexes, the SPX has been able to hold itself above the 100-day MA all this year, having tested the line successfully in June. With the recent rally having been so short in length (7 weeks), drops down to the line seem highly probable as the index is showing more weakness now than at any other time of the year.

To the upside, the SPX shows no intra-week resistance until 1674 is reached, which is also the area where the break occurred (1676) this past week. Nonetheless, if the index opens lower on Monday, the 1654/1657 level will also show resistance from a previous high of some consequence seen on June 18th at 1654, as well as from the 50-day MA at 1657 that was broken on Friday.

It should be mentioned that the SPX during the past 30 months has either had a previous high to fall back to, or a previous low to fall back to when correcting, with one exception which was the strong correction seen in August 2011 when the index fell 300 points over a period of 3 months. With the previous high having been broken on Friday and the previous low is all the way down to 1560 it could mean that if this correction is not different from the previous ones, that the index could drop another 95 points without much problem, and still be in a long-term uptrend. If it is like the one in Aug11, the index could end up dropping all the way down to the 1400 level within the next couple of months.

It is still too early to tell what kind of a correction is being seen, but the reality is that this correction is occurring "without" bad news and that is the worst kind because there is nothing to "fix" that would make a difference.

The indexes broke down this past week but there was no specific news that caused the fall, other than the worry that if things are getting better it would mean less Fed Stimulus support. If that is the case, the big question then becomes "where should the market be valued if the Stimulus is gone?" and the only way to find out is to test the levels of support below.

There was certainly a lack of buying interest seen this past week and it is likely that most of the selling at the beginning was profit taking rather than new shorting. Nonetheless, as the week dragged on and no new buying was seen, the bulls began to worry and the traders took advantage of that to break important support levels that have now put the market at risk of much further downside if no positive catalyst is found. There are no economic reports of consequence due out this coming week though on Wednesday the FOMC meeting minutes of last month come out, which could give Fed Chief Bernanke one additional opportunity to ease the fears of the bulls regarding the Stimulus program. Nonetheless, there are other factors around the world right now, such as the riots in Egypt and the weakness of the markets in Asia that might work as a monkey wrench preventing Bernanke from easing fears, even if he decides to say something.

The probabilities favor further downside this coming week with only chart support levels being in play to help stem the tide.