DOW Friday closing price - 15070

The DOW technically gave a sell signal on Friday having closed below the previous low weekly close 15115. The sell signal is the first given since November and could be the first tangible sign that the seasonal correction has started. Nonetheless, since the close was only by a small margin and still "above" the major psychological support at 15,000, the sell signal will be seen with some skepticism that will require additional follow through this coming week before the traders gain confidence in shorting the index.

On another negative note, the DOW did cancel out most of the rally seen the previous week failing to follow through to the upside in spite of the close on the highs of the week the previous week and then closing near the lows of the week suggesting further downside will be seen this coming week. Nonetheless, the bears were not able to gain back everything that was lost as the index stayed 110 points away from the previous week's low, suggesting that the traders are still not convinced that there is more correction to be seen.

On a weekly closing basis, there is minor resistance at 15248 and minor to perhaps decent resistance at 13354. On a daily closing basis, there is minor resistance at 15176 and minor to decent at 15248/15254. Above that level there is minor to perhaps decent resistance again at 15383 and decent at 15409. On a weekly closing basis, support is minor at 14547 and then nothing until minor support is found again 14093 and again at 13981. On a daily closing basis, support is minor at 14995, decent at 14960, minor again at 14887 and a bit stronger at 14687.

The chart of the DOW is starting to look top-heavy as the last 3 weeks the bulls have been unable to make any new highs in spite of the fact that the economic news has been consistently coming in a bit better than expected. Nonetheless, the bears have also been unable to generate any tangible breaks of support, meaning that the traders are not yet endorsing short positions.

To the downside, the DOW has important daily close support between 14960 and 14995 that now includes the 50-day MA, currently at 14995. A break of those levels on a daily closing basis will likely push the index down to the next level of decent support around the 14440 to 14560 level. To the upside, the DOW now shows minor daily close resistance at 15170 and decent but likely indicative daily close resistance between 15248 and 15254. A close above 15254 will likely push the index to test the all-time high daily close at 15409.

The DOW for the last 2 weeks has been has been a yo-yo as the index has traded consistently with rallies lasting 1-2 days and drops lasting 1-2 days, and all mostly within a 300-400 point trading range between 14900 and 15300. Keeping in mind that the index has been on a strong uptrend for the entire year, the inability of the bulls to continue the uptrend in spite of good economic news is likely indicative that without some strong positive catalyst that the seasonal correction will occur.

It should be mentioned that the seasonal correction is not only running very late but is now facing the third quarter earnings reports that start in 3 weeks on July 8th, meaning that if it does not occur over the next 2-3 weeks it may not occur at all. The FOMC meeting is this week with the Fed announcing the results on Wednesday. The probabilities favor the DOW traders holding the index up until then, hoping that Fed Chief Bernanke will offer some "calming words" that will keep the buying coming in. Nonetheless, if the traders are not happy with what is said or offered, it is likely that a break of support will occur that will cause the seasonal correction to happen in a sharp and fast manner over the next 3 weeks with the next earnings quarter then offering new hope that the uptrend will resume thereafter.

The seasonal correction has usually meant a drop in the DOW of anywhere between 1000 to 1600 points at least. With the index having already dropped 600 points from the highs, it is possible to imagine it dropping an additional 400-1000 points over the next 3 weeks with 14400 to 13800 as the downside objective. The 200-day MA is currently at 13915 and that is certainly a viable objective to the downside.

As such, there is a good possibility/probability that the DOW will trade with slight weakness on Monday and Tuesday, with the recent low at 14844 as the objective, and then after Wednesday's FOMC announcement, a sharp drop would occur with 14000 as the downside objective to be reached by the end of the first week of July.

NASDAQ Friday closing price - 3423

Like the DOW, the NASDAQ also gave a small sell signal on Friday having closed below the previous low weekly close at 3455. The index did technically generate a retest of the high at 3531 last week having gone above the previous week's high at 3482 with a rally this past week to 3484. The index closed in the lower half of the week's trading range suggesting that last week's low at 3387 will be broken this coming week. On the weekly chart, no support is found below 3378 until the 50-week MA is reached, currently at 3140.

The NASDAQ now shows 3 successful retests of the 3531 high on the daily chart and each of them lower than the previous one, suggesting the index is now in a short-term downtrend.

On a weekly closing basis, there is minor resistance at 3469 and minor to perhaps decent at 3498. On a daily closing basis, there is minor resistance at 3445, minor to decent at 3473, minor again at 3491 and decent at 3502. On a weekly closing basis, support is decent at 3202/3206 and minor at 3161. On a daily closing basis, support is decent at 3400/3401, minor at 3328, very minor at 3296 and minor to decent at 3200. Strong support is found at 3166.

The bulls in the NASDAQ were able to generate one rally above a previous day's high and that was on Monday when the index went above the previous Friday's high at 3473 with a rally to 3484. Nonetheless, the rest of the week the index had nothing but lower highs each and every day and did close on the lows of the day on Friday suggesting that trend will continue at least on Monday.

The NASDAQ has tested the gap area between 3344 and 3370 successfully on 2 occasions (3378 and 3387) and those successful retests can also be considered retests of the 50-day MA, currently at 3373. Nonetheless, the bulls were unable to generate any kind of an indicative bounce off of those successful retests, suggesting that weakness in the chart continues to grow.

To the upside, the NASDAQ shows resistance levels at 3484, at 3491, at 3514 and at 3531. To the downside, support is found at 3387 and 3378 and then nothing of consequence until 3200 is reached.

The 3370/3373 area in the chart of the NASDAQ is a key level of intra-week support as that is where the 50-day MA, a recent spike low at 3378, and most recent and important gap area are found. A confirmed break of the line and closure of the gap will leave the index without any prior support of consequence until the 3200 level is reached, suggesting that if both of those things occur that the index could generate a fast drop of about 170 points in a very short period of time. It should also be mentioned that several of its main components (AAPL, AMZN, NFLX, and GOOG) are all showing decent to strong chart reasons to believe they are heading lower as well. If those stocks head lower, it will be very difficult for the bulls to keep the index afloat.

The chart of the NASDAQ is strongly leaning to the downside and any daily close below 3400 is likely to be a catalyst since the index shows a double daily closing low at that price. That double low is not considered a double bottom since the index has been rallying and therefore highly likely to get broken.

To the upside, the 3484 level is now pivotal intra-week resistance as a break above that area would infuse the bulls with renewed confidence that the uptrend has resumed. Probabilities favor the downside.

SPX Friday closing price - 1626

Like with all other indexes, the SPX went above the previous week's high meaning that the recent all-time high at 1687 will have been retested successfully if the index goes below last week's low at 1608 this coming week. The successful retest on the weekly chart will likely bring about new selling and likely causing the seasonal correction to start as any drop below the most recent low at 1598 will offer a 1484 objective before any support of consequence is found.

The SPX did test the only intra-week support near-by at 1598 a week ago Thursday and retested that area successfully this past Thursday with a drop down to 1608. Both of those retests should have generated a strong rally as the index is still in a strong uptrend, but they didn't, meaning that the bulls no longer have the edge. Having failed to rally the index off of those successful retests, should the index see either of those areas again it will increase the probabilities of a break occurring. The probabilities favor the index breaking below 1608 this week.

On a weekly closing basis, resistance is minor at 1643 and minor to decent at 1667. On a daily closing basis, minor resistance is found at 1636, minor to decent at 1643, minor again at 1660 and decent at 1669. On a weekly closing basis, support is minor at 1558, decent between 1553 and 1555, very minor at 1515, and minor to perhaps decent at 1500/1503. On a daily closing basis, support is minor at 1612 and minor to perhaps decent at 1608. Below that, there is very minor support between 1593 and 1597, minor again between 1552 and 1553 and decent between 1541 and 1545.

Friday's red close in the SPX was a surprise since the index was supposed to head higher after Thursday's close on the highs of the day. The red close suggests weakness is filtering is increasing every day and without some strong positive fundamental catalyst, unlikely to change.

To the upside the SPX shows resistance levels at 1648, at 1661, at 1674 and at 1687. To the downside, support is found at 1608 and at 1598.

The 50-day MA in the SPX is currently at 1614 and that line has not been broken on a daily closing basis all year. Any close below that line this coming week would be a sign that further downside will be seen as the 50-day MA is the main line for support on strong short to mid-term trend. Probabilities favor the downside.

Speculation has been that the Fed is considering cutting back on the Bond buying program and the reality is that it makes sense for them to do so as the only thing the stimulus has been successful in doing is keeping the stock market up but not necessarily stimulating more business, more hiring, or more dollars invested in growth (GDP continues to languish and weaken). The Fed is likely to be addressing this concern on Wednesday when they announce the results of this month's FOMC meeting. Nonetheless, the probabilities favor more calming words but less action. The reality seems to be that the Fed is at a point where there is little more that they can do and the market seems to be realizing that.

The charts of all the indexes are giving failure-to-rally signals though no breaks of support as yet have occurred. Nonetheless, those failures are coming in the face of better than expected economic reports suggesting that no further upside will occur until a new "set" of positive fundamental information comes out, probably not before the next earnings quarter begins on July 8th.

The very reliable "sell in May and go away" seasonal correction is running late this year and is at risk of not occurring if the bulls are able to hold on for another 3 weeks until the earnings reports start to come out. Nonetheless, seasonal corrections in the past have occurred in as little as 3-5 weeks and with the high of the indexes having been seen 2 weeks ago and the earnings reports starting in 3 weeks, there is still time for the correction to occur. By the same token, if it doesn't take hold by the end of this coming week, the probabilities of it occurring will drop strongly.