DOW Friday closing price - 15010

The DOW extended the recent short-term downtrend having generated the third red weekly close in a row. Nonetheless, the index saw some late week buying to close in the upper half of the week's trading range and in the 15000 demilitarized zone, suggesting that some recovery is likely to be seen this coming week that will end up with a green close next Friday. In addition, the fact that on a weekly closing basis the index has not broken the decent psychological support at 15000 does suggest that the traders still believe the uptrend will continue and that this recent move down is simply a correction.

The DOW could be in the process of building a bearish Head & Shoulders formation but that won't be known for at least 2 weeks if not a bit longer. The first 2 parts of the equation have been built with the possible left shoulder being at 15542, the head at 15658 and the right shoulder in the process of being built. If the Head & Shoulders formation gets built and then the neckline broken, it would suggest that a top to this rally has been found and that at least a mid-term downtrend will have begun with the 14000-14200 level as the first downside objective.

On a weekly closing basis, minor to decent resistance is at 15354, and decent resistance at 15658. On a daily closing basis, very minor resistance is found at 15024, minor to perhaps decent between 15248 and 15254 and minor to decent again at 15318. Above that level, there is decent resistance at 15409, minor 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 to perhaps decent at 14897 and strong at 14659.

This past week, the DOW confirmed the break of the 100-day MA, currently at 15125, with 5 additional closes in a row below the line and that is the first confirmed break of the line since the last week of December (8 months). The break suggests the uptrend is over and that at least a sideways trend is to be seen for the next few weeks or months. A retest of that line is likely to be seen this coming week and what the index does on that retest will likely determine whether the downtrend has begun or whether the index will recover more and/or resume the uptrend. If the bulls are successful in closing above the line for at least 2 days in a row, a rally up to the 15300-15400 level will likely occur where it will likely be decided whether the H&S formation is to be built or not. A failure to close above the line and a new low below last week's low at 14880 being made thereafter, would end up being a strong signal that the index has begun a downtrend.

To the upside, the DOW will face minor resistance at 15083, and again between 15125 and 15139. Further resistance will be found at the 50-day MA, currently at 15270 as well as at the "general" resistance at 15300 with 15340 also having been a previous spike high. The strong intra-week resistance will be found between 15400 and 15540. To the downside, the index will find decent support between 14844 and 14880 and then decent to strong support at 14551.

The DOW has been lagging behind all other indexes for several weeks and that has to be a negative sign inasmuch as Blue Chip stocks always do well when the market is long-term healthy and traders believe much further upside is yet to come. The fact the index has been lagging for several weeks probably means that Institutional and Hedge funds are slowly liquidating their long term positions (which they normally have in larger quantities in the Blue Chip sector) in anticipation that a mid to long term downtrend may be starting in the near future.

The DOW has been under sell pressure as of late with the bulls unable to generate the kind of buying that has been seen in these types of dips in the past. No longer is the index bouncing strongly when a support level is reached and holds. As such, there are more questions now about what the index might do (or not do) than at any other time in the past 4 years.

For this coming week it is likely the DOW will move higher with last week's high at 15106 likely to be broken. Nonetheless, much past that scenario is difficult to speculate on as there are too many new variables that are now in play. The probabilities do favor further upside with 15354 as a viable upside objective. Nonetheless, based on the lack of buying strength seen the past 2 weeks and the fact the Fed will start tapering the Stimulus program in September, the traders will find themselves losing the one crutch they have been dependent on all this year and how they will evaluate the value of the index without the Stimulus is something that has yet to be determined.

NASDAQ Friday closing price - 3657

The NASDAQ continues to be the strong index having been the only one that did not give a sell signal on the daily chart during this recent weakness period. In addition, the index just "barely" got below last week's low at 3598 (got down to 3589) and did turn around to close in the green and on the highs of the week, and more importantly less than 1% below the 13-year high close at 3689 (compared to 10% in the DOW and 3% in the SPX), suggesting that a new high could be easily seen this week if the economic reports are positive and/or the 5 main stocks in the index (AAPL, AMZN, GOOG, NFLX, and PCLN) continue to show positive appreciation as they have done recently.

The NASDAQ is definitely "leading the parade" and this is much like what was seen in the Dot.Com era when the index outperformed the other indexes by "a mile". It is without a doubt that the tech sector is in the forefront right now as the economy keeps faltering but interest in buying technology products continues strongly in spite of weakened pocketbooks.

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 minor to decent resistance at 3684 and decent at 3692. On a weekly closing basis, support is minor to perhaps decent at 3602, very minor at 3587, minor at 3498 and decent at 3357. On a daily closing basis, support is minor at 3609/3613, minor at 3589 and now decent at 3579. Below that, there is no support until minor support is found at 3505.

The NASDAQ gapped up on Friday between 3639 and 3643, possibly leaving an island gap formation as the index gapped down 1 week prior between 3668 and 3626. With the index closing on the highs of the week and further upside expected to be seen this coming week, there is a possibility of a second gap occurring on Monday, which in turn would be considered a new breakaway/runaway gap formation if the index makes a new 13-year high above 3694 before the gap is closed. Such an event would likely generate a new rash of buying and an attempt at reaching the next resistance level at 3860 seen 14-years ago.

The NASDAQ will face a possible pivotal week inasmuch as the action seen this past week has put the traders in a position to breakout or breakdown, all within a few points of where the index is trading at right now. A new high above 3694 would stimulate a new rash of chart buying, while closure of the gaps down at 3639 followed by a break of a minor but now indicative support at 3633, would likely be considered a successful retest of the highs as well as a failure to follow through.

To the upside, the NASDAQ has very minor resistance at 3675. A rally up to that level is expected as it would be a rally above last week's high as well as enough upside to close the downside gap at 3668 that is now expected to happen. The next resistance level at 3691 is slightly more important as it was a successful retest of the 3694 high on the daily chart. Since the index has not yet had a successful retest of the highs on the weekly chart, going above last week's high but failing to get above 3691 would be what the bears would like to see happen in order to fulfill the chart so that a downtrend could begin. The last resistance seen in the last 13 years is at 3694 which was seen just 3 weeks ago and does represent the only resistance built recently.

To the downside, the NASDAQ has minor support at 3633 from the first spike drop seen after the 3694 high was made. Further and more important support is the recent low at 3589 that if broken would be considered disappointing, given the action seen this past week. Last intra-week support is down at 3573 which if broken would give a sell signal on the daily and weekly chart as well. It should be mentioned though that the 50-week MA is currently at 3555 which is also the top of a recent bullish gap between 3522 and 3552 that created the recent rally to new 13-year highs and that if closed would be a failure to follow through signal of consequence, but if it holds would give the bulls some ammunition to try the upside again.

It is evident that the NASDAQ is the index to watch right now as that is where all the buying is being seen. The NASDAQ and its 5 main stocks seem to hold the key to what the market is going to do at this pivotal point. The probabilities slightly favor a new 13-year high but it would not be surprising if the index stopped at 3675 and started to fall back down, having tested the high on the weekly chart.

SPX Friday closing price - 1663

The SPX had a reversal week, having made a new 7-week low but then closing in the green and on the highs of the week, suggesting further upside will be seen this coming week. The index has not yet tested the all-time high at 1709 but that will begin to happen this week if the index goes above last week's high at 1664 as expected. A successful retest of the high would be considered a sign that a top has been found and the possibilities of that scenario occurring are high as many analysts fundamentally predicted early this year that the index would get to 1700 but no further. Having accomplished that goal and the Fed looking to taper the Stimulus program, there doesn't seem to be many fundamental reasons for the index to go higher.

Chart-wise, the SPX has been acting better than the DOW but not as well as the NASDAQ and that has added to the confusion the traders are feeling as the mixed picture does not give any clear clues as to which index is offering the correct overall picture of the market. Simply speaking, the index has often in the past been the determining factor but now seems to be the mid-point of a tug-of-war fight between the other indexes.

On a weekly closing basis, there is minor to perhaps decent resistance at 1667, minor at 1692 and decent at 1709. On a daily closing basis, there is minor to perhaps decent resistance at 1669, minor at 1685, minor to decent gain at 1697 and decent at 1709. On a weekly closing basis, support is minor at 1655, minor again at 1630 and decent at 1592. On a daily closing basis, support is very minor at 1649, minor to perhaps decent at 1642, minor to decent between 1609 and 1612, and decent at 1573.

The SPX tested the 100-day MA, currently at 1637, successfully this past week with Wednesday's low at 1639, followed by 2 green closes in a row. The 100-day MA has held all this year having tested the line successfully once before in June and subsequently making a new all time high thereafter. As such, if this recent drop was just a correction, the uptrend should resume. On a negative note though, the correction was unexpected and the length and depth of the correction were too short to be considered a normal correction, suggesting that something has changed and that a different result could be seen this time.

The SPX, like the DOW, could be in the process of "technically" building a Head & Shoulders formation but the probable right neckline seems to be a bit too high to be a valid formation at this time, suggesting that the traders are not likely to put much dependence on the formation itself and will need to see more chart action before any serious consideration is given to it. By the same token, the action seen the past 2 weeks does suggest that a top has been built and that the probabilities favor further downside. As such, the index is leaning a bit more toward the kind of end result the DOW is giving that what is being seen in the NASDAQ. To the upside, the SPX shows decent intra-week resistance at 1687 and decent daily close resistance at 1669 that offer good chart evaluation points that will help to determine what the traders are planning. In addition, the index shows a "rare" gap between 1687 and 1684 that also could be indicative as a failure to close the gap will be considered a strong sign that a top has been found. Nonetheless, closure of the gap is likely to occur, which in turn means that the intra-week high at 1687 seen on May 22nd is going to be pivotal as a failure to get above that level if the gap is closed will likely mean that the all-time high at 1709 will have been tested successfully on both the daily and weekly chart. Further resistance is found at 1700 and at 1709 but if 1687 is broken, the probabilities of the uptrend resuming and making a new all-time high will increase substantially.

To the downside, the SPX now shows support at Friday's low at 1654, which does include the 50-day MA, currently at 1660. A break below 1654 and a confirmed close once again below the 50-day MA, would weaken the chart substantially. Important support is found at last week's low at 1639, especially if the index is able to go above last week's high at 1664 and then drop below 1639. Important support is found at the 1600 level and then more so at 1560.

The probabilities are high that the SPX will get above 1664 this coming week and get up to at least the daily close resistance at 1669. Further upside is likely to be seen with the gap area between 1679 and 1684 targeted. Nonetheless, any rally up to 1679 that would result in a failure to close the gap, would be considered negative, and if a second gap were to occur within that context, it would be a strong sign to the traders that no further upside will be seen.

The indexes are giving mixed signals with the DOW sitting 4% below its all-time high, the SPX sitting 3% below its all-time high and the NASDAQ less than 1% below its 13-year high. In addition, the DOW has outperformed all the other indexes to the downside having dropped 9% more than the NASDAQ over the past 3 weeks. It is evident the Blue Chip stocks are being chosen for liquidation over all other stocks and that does suggest that there has been a change of outlook for the overall market, different than what it has been the last 4 years as Blue Chip Stocks are rarely liquidated in such an evident fashion unless the outlook for the future has dimmed substantially.

Much of the sell pressure is the now highly likely event that the Fed will start tapering down its Bond purchasing program (Stimulus) starting in September, meaning that the traders will now have to start relying on the actual economic outlook of the market, rather than on the artificial aura that the Fed has created with such easy money availability. Simply stated, the 2-3% GDP numbers that in the past would have depressed the market and meant that growth was mostly stunted will now begin to mean more than they have meant in the recent past. Simply stated, "do these prices being seen right now represent the true value of the market?". Past history would suggest the answer is "no" and that the market will have to test the downside to find out exactly where the buying interest is found without Fed Stimulus.

Chart-wise speaking, this week will be important since the indexes have been under sell pressure during the last 2 weeks and that sell pressure was relieved somewhat this past week, meaning that this week will be the first opportunity to see how much buying power the bulls have left. In addition, the bulls will have some decent economic reports scheduled for this week (Durable Goods, Consumer Confidence, 20-city Case/Schiller report and 2nd estimate of GDP) that will offer new information that will help them decipher what the future will offer. As such, where the indexes end up this coming week will likely be indicative of what they feel the rest of the year will bring.