DOW Friday closing price - 15451

The DOW generated a new all-time intra-week and daily closing high on Wednesday with the surprising announcement by the Fed that no tapering would occur in September. Nonetheless, the bulls failed to follow through on Thursday and Friday and a failure signal was given on the daily closing chart Friday when the index closed once again below the previous all-time high daily close at 15658. In addition, in spite of the new intra-week high at 15709 seen on Wednesday, the bulls were unable to generate a new all-time high weekly close on Friday, leaving the possible Head & Shoulders formation still viable on the weekly closing chart should the index generate a red close next Friday.

The DOW closed near the lows of the week suggesting further downside will be seen this coming week. In addition, it should be noted that the index closed at 15471 but "settled" 20 points lower at 15451, suggesting there were a lot of sell orders on the close. With all the good news the bulls received last week, the inability to follow through at the end of the week seems to be a sign that the bulls will have a lot of problems stimulating further buying interest.

On a weekly closing basis, decent to perhaps strong resistance is found at 15658. Above that level there is no resistance until the psychological resistance is reached at 16000. On a daily closing basis, resistance is decent at 15658 and strong at 15676. On a weekly closing basis, support is minor at 15354, very minor at 15115 and decent to perhaps strong at 14799/14810. On a daily closing basis, minor support is found at 15409, minor but perhaps indicative support is found between 15294 and 15300. Below that, minor support is found at 15115, minor to decent support at 14960, decent support at 14776 and decent to strong support at 14659.

The DOW faced a pivotal week this past week with the FOMC rate decision coming out on Wednesday. The Fed surprised everyone by announcing they would not be tapering the Stimulus program at this time (street expected 20%) as they needed more positive data before they could begin to cut down. The news caused a rally of consequence to occur with the index rallying 225 points in less than 2 hours as traders interpreted the announcement as more of the same support for the market as has been seen the past few years.

Nonetheless, the euphoria in the DOW was short-lived as no tapering means the economy is still not growing at the pace that is desired by the Fed, in spite of the slightly better than expected economic news that has been seen the past few months. It also means that the Stimulus program itself has only kept the kept the status quo for the economy but not generated the kind of improvement that is needed to stand of its own. With the Stimlulus program originally scheduled to be $800 billion dollars and now at $4 trillion), it is likely the market interpreted the news as meaning diminishing returns are to be expected as it continues, rather than "new" growth.

From a chart point of view, the bulls were unable to take the DOW any higher after the initial response on Wednesday, and on Friday after 2 feeble attempts on Thursday and Friday morning to generate new buying the index closed 185 points lower on the day and on the lows of the day with nothing but selling being seen into the close.

To the upside, the previous intra-week high at 15658 in the DOW will now be decent resistance and the new all-time high at 15709 will be decent to strong resistance. To the downside, there is minor support at 15405, minor and mostly general support at 15300, which does include the 50-day MA, another minor support at 15180, and then nothing until the 15000 demilitarized zone.

The DOW did give some decent negative signs on the intra-day chart on Friday, having broken the 50 60-minute MA, currently at 15495, for the first time in the last 12 trading days. In addition, on the same intra-day chart, the index showed a double low at 15470/15471 that got broken on the settlement of the index, suggesting strong selling was seen on the close. On the intra-day chart, there is decent support down at 15400 that might generate a retest of the 50 60-minute MA at 15495, but the support below 15400 level is all very minor until the 200 60-minute MA is reached, currently at 15150.

It is evident that the bulls in the DOW gave up "the ship" on Friday late in the day when the index settled 20 points lower than the last tick that was seen at 15472. Such a clue does suggest buying interest on Monday will not be found unless something unexpectedly fundamentally positive (unlikely) happened over the weekend. Unfortunately for the bulls the rally has been mostly Fed driven and with the Fed having given about the biggest positive surprise on Wednesday and the end result not being successful, it is difficult to imagine what positive things the Fed could say this coming week that would bring in new interest in buying.

NASDAQ Friday closing price - 3774

The NASDAQ made a new 13-year high this past week and closed in the upper half of the week's trading range, suggesting that further upside will be seen this coming week. The index has no resistance above until 3860 is reached (60 points higher above the high of last week) and with AMZN, NFLX, and PCLN having made new all-time intra-week and weekly closing highs this past week, and AAPL and GOOG generating a positive week as well, the probabilities do favor the index once again out-performing the other indexes as it has been doing most of the year.

The NASDAQ totally out-performed the other indexes this past week, giving back only 40% of Wednesday's rally whereas the SPX gave back 72% and the DOW gave back 108%. It is evident that there is still buying interest in tech stocks whereas Blue Chip stocks took it on the chin. Whether this unexplained mixed-signals phenomena will continue this week or not, is a mystery.

On a weekly closing basis, there is no resistance found until old resistance (year 2000) is found at 3860. On a daily closing basis, there is very minor resistance at 3789 and then nothing for the past 12 months. On a weekly closing basis, support is very minor at 3689 and decent at 3589. On a daily closing basis, support is minor at 3715 and at 3692, very minor at 3654, minor at 3600 and decent at 3578/3579.

The NASDAQ has been on a tear since November of last year having rallied 988 points without a significant correction and generating a 35% increase in price. The rally has been the second longest in the past 13 years, with the biggest rally being the one that started at the last recession lows in March 2009 when the index rallied 1270 points before a correction of consequence occurred. Other than that, you would need to go back to the Dot.Com rally in 1998 to find a rally bigger than the one being seen now.

The NASDAQ has no resistance above until 3860 is reached and even then that resistance is old (from 2000) and considered minor, meaning that there really is little to stop the index from getting up to the 4000-4200 level if the buying continues to be seen in the stocks mentioned above. By the same token, PCLN is now at $1000 and that has to be considered a major psychological resistance. AMZN and NFLX are slightly above $300, and that level also needs to be considered a decent psychological resistance. GOOG is at $900 and is facing a double top of consequence at $919/$923 that looms difficult to break. Even AAPL, which represents 13% of the index, recently found decent psychological resistance at $500 and with the recent disappointing earnings report, is having trouble getting back up to that level. These levels of resistance found in the pivotal index stocks, do suggest that further upside, above 3860, may be difficult to achieve.

The NASDAQ did close on the lows of the day on Friday and the first course of action for the week will likely be to the downside. Pivotal support is found at the previous daily closing high at 3694 (80 points below Friday's close. If that level is broken on a closing basis, it would be safe to assume that a temporary top has been found and that a significant correction is occurring. Nonetheless, anything less than a close below 3694 will keep the index in a bull mode with higher prices likely to occur even if the same is not seen in the other indexes.

SPX Friday closing price - 1709

The SPX also made new all-time intra-week and daily closing highs after the Fed announcement on Wednesday but on a weekly closing basis the bulls were only able to close the index at the previous all-time high weekly close at 1709, meaning that a red close next Friday would be create a double top on the weekly closing chart that could portend negative action for the rest of the year. With the index closing exactly in the middle of the trading range for the week, it is evident the traders are looking at next week as a pivotal week for the rest of the year.

The SPX certainly seems to be the intermediary between the negative signals being given by the DOW and the positive signals being given by the NASDAQ. With the SPX and the Fed being the most tied in to the financial situation of the economy it is likely that whatever the index does will reflect what the traders believe the Fed action will mean to the market the rest of the year.

On a weekly closing basis, there is decent resistance at 1709. Above that level there is no resistance. On a daily closing basis, there is minor resistance at 1725. On a weekly closing basis, support is minor at 1667, minor to decent at 1632 and decent at 1592. On a daily closing basis, support is minor at 1709, minor again at 1667 and at 1650, minor once more at 1642 and decent at 1630.

The SPX closed on the lows of the day and the first course of action for the week should be to the downside. The index shows minor support at 1700 but it is from previous highs rather than from previous lows and not likely to be all that dependable. The next previous intra-week level of support that is likely to have some strength is at 1676 that does include the 50-day MA. Drops down to that level are likely to be seen if the index starts trading below 1700.

It should be mentioned that the SPX does show 2 rare gaps to the upside (at 1688-1691 and at 1672-1674), much like the 2 rare gaps to the downside (at 1684-1679 and at 1656-1652) that already got closed in the past couple of weeks. It is highly unlikely these gaps to the upside will remain unclosed, meaning that the probabilities do favor the index getting down to at least the 1672 level soon, even perhaps this week. A drop down to that level would highly suggest that a double top will be built on the weekly closing chart, meaning the future for the rest of the year would not look rosy if that were to happen.

Without a doubt, the SPX will be the most closely watched index this week for all the reasons mentioned above. Based on the reaction to the surprising and positive action by the Fed, I would venture to say that the index will close red next Friday and that a short to mid-term downtrend will start with the 1560-1600 level as the minimum objective.

The Fed action on Wednesday was surprising and positive for the market but the result at the end of the week left strong doubts that it will be a lasting benefit. Fundamentally, the Fed action suggested as many negatives as positives as it shows that the Fed has not yet seen the kind of growth in the economy that it wants to see and if the $4 trillion dollars the Fed has already invested in Bond Purchases has not generated that growth yet, it is unlikely it will do so in the future.

It should also be mentioned that the market is looking ahead to the Debt Ceiling problem that some analysts are saying is unlikely to be solved because of the deep divide between the Democrats and the Republicans. Congress has been inefficient because of this and that does not bode well for the U.S. as that divide is not likely to be solved at this time. With the U.S. teetering on the edge of a chasm and both parties willing to jump without a parachute, the probabilities favor a downfall rather than an upswing.

Quite a bit of economic information is due out this week with Housing numbers, Consumer Confidence, Durable Orders, 3rd Estimate of GDP, and personal Income and Spending. Nonetheless, the probabilities do not favor any of these reports being way out of line and with the Fed being the main topic of conversation, even if the reports come out better it would probably be considered a negative as talk of a taper by the Fed would again resume. It does seem like the traders have painted themselves into a corner where they are damned if they do and damned if they don't.