DOW Friday closing price - 16020

The DOW paused its upward climb this past week generating for the first time in 9 weeks a red weekly close on Friday. By the same token, the red close was not all that indicative as the index closed only 68 points lower (less that .5% on the rally of 1346 points) and near the highs of the week suggesting that the uptrend could resume this coming week.

Nonetheless, using the previous week's high at 16174, as well as the 2000 high at 11750 and the 2007 high at 14198, the DOW chart now shows a powerful 3 point up-trend weekly channel line that can be considered a strong indicator of a major top having been made. The 16174 high can still be broken by a small amount, keeping the channel line in place, but the 3 points now seen does make the line much more powerful and likely to be adhered to. Simply stated, it is now highly unlikely that the index can go much higher than what has been seen already and it is certainly possible that the high has been set.

On a weekly closing basis, there is minor resistance at 16068. On a daily closing basis, there is minor resistance at 16097. On a weekly closing basis, support is minor at 15072 and decent to perhaps strong at 14799/14810. On a daily closing basis, minor support is found at 15900 and minor to perhaps decent at 15821. Below that, there is minor support between 15658 and 15680, minor again between 15409 and 15413, minor to perhaps decent at 15168, and decent between 14960 and 14996.

The DOW generated a spike high rally on Friday after the Jobs report came out better than expected. The close on the highs of the day does suggest that further upside will be seen at the beginning of the week. Nonetheless, the good news might not carry the index much higher since good economic news likely means the Fed will start tapering the Stimulus program sooner rather than later. There has already been talk that some tapering could be announced as early as the next FOMC meeting on December 18th. As such, the rally on Friday could end up being a 1-day phenomenon, which has often been seen during the past year.

To the upside, the DOW shows minor intra-week resistance at 16030, minor to perhaps decent at 16120 and decent at the recent high of 16174. To the downside, the index shows minor support at 15865 and minor to perhaps decent at last week's low at 15791. Further support is found between 15658 (previous high) and 15700 (general support) which does include the 50-day MA that is currently at 15585 but moving up at a fast pace that will likely have the line up near the intra-week support levels mentioned above within a week to 10 days.

The possibilities have certainly increased that the DOW has found a top to this rally but since the other indexes did not give the same kind of signal on Friday there will still be a lot of unanswered questions that are not likely to begin to be answered until December 18th when the FOMC announces its rate decision. Nonetheless, there are strongly negative factors facing the index in January in the way of the Debt Ceiling issue, as well as the fact that some tapering of the Stimulus program is likely to occur sometime during the next 3-4 months. In addition, there is a strong seasonal tendency for the index to generate a correction of consequence in the first quarter of the year, meaning that the buying the next few weeks, if seen, is likely to be tentative and limited.

The outlook for this coming week in the DOW is likely to be a rally up to the previous all-time high daily close at 16097 with a decent possibility of getting above last week's high at 16098 but not above the 16120 level, followed by profit taking that would cause the index to fall back down to support by the end of the week at 15865. Such a scenario would accomplish a retest of the all-time high at 16174 (which is needed) and leave the door open for a drop down to the previous all-time high weekly close at 15658 the week after as the traders would be protecting themselves against the Fed announcing on December 18th that the tapering program would start earlier than expected. Keep in mind, that trading down to the 15700 level is considered a backing and filling event and not indicative of anything other than normal chart trading.

NASDAQ Friday closing price - 4062

The NASDAQ continued the uptrend having been able to generate a new 13-year weekly closing high this past week in spite of early week weakness. Nonetheless, the new 13-year high weekly close was only by 3 points above the previous weekly close and kept the index below a minor weekly close resistance from December 1999 at 4069 that is the first resistance found on the chart after the 3860 resistance was broken, meaning that the technical traders do have some chart reasons for taking profits here.

The NASDAQ was able to generate further upside on the coattails of AAPL (13% of the index) continuing its recent rally and GOOG that made yet again new all-time highs. Nonetheless, AMZN had a negative reversal week after making new all-time highs, NFLX confirmed a successful retest of the all-time intra-week high and PCLN closed in the red after failing for the first time in the last 4 weeks to make new all-time highs, all actions suggesting that the index may be running into enough selling pressure to prevent further upside of consequence from occurring.

On a weekly closing basis, minor resistance is found at 4069 and decent to perhaps strong resistance is found between 4234 and 4252. On a daily closing basis, there is no resistance above for the past 12 months. On a weekly closing basis, support is very minor at 3919 and at 3791 and very minor again at 3689. Below that, decent support is found at 3589. On a daily closing basis, support is minor at 4033, very minor at 3985, and minor to perhaps decent at 3921. Further minor support if found at 3907and minor to perhaps decent at 3857.

The NASDAQ is still the strongest index among the big 3 but it is evident that that some selling interest is being seen at 4069, which is an old "weekly closing level" that stopped the index temporarily back in the year 1999 and that generated a drop back down to 3882 before further upside was seen. The index got up to that level a week ago Friday and again last Friday, meaning that if the bulls are unable to take the index above last week's high this coming week, that it will become a double top. The probabilities do not favor the bears being successful in building that double top since the index did close near the highs of the week and further upside above 4069 is likely to be seen this week. Nonetheless, it is certainly a level that is likely to dominate the trader's attention at the beginning of the week as a drop below Friday's low at 4042 would create a double top on the daily chart and a break below last week's low at 4004 would confirm it.

To the upside, the NASDAQ chart shows minor resistance at 4069 and again old and minor intra-week resistance at 4073. Above 4073 there is no resistance until 4192 is reached, meaning that the bears need to make a stand here or be at risk of allowing the index to run up for another 120 points. Further but much stronger resistance is found in the mid 4200's. To the downside, the 4004 level is now considered a small but pivotal support level that if broken would likely cause the index to drop down to the next support level at 3911, which also is supported by the 50-day MA, currently at the same price.

In looking at the long-term chart of the NASDAQ, as well as to the main stocks in the index, it does seem that this week could be pivotal as far as the rest of the month is concerned. In the index, the 4069 level could be important if a double top is built (unlikely) but not as important on an intra-week basis as the 4073 level which was a minor intra-week high seen in June 2000 and from which a drop down to 3832 was seen. The 4073 level is not of major importance long term but in a month like December is, where small trading ranges and a lack of strong direction is generally seen, it likely is important as far as the trading that will be seen the rest of the month. Last week's action in AMZN, PCLN, and NFLX does suggest that a top has been found in those stocks and if that is the case then the index will likely be unable to get above 4073 and generate a rally up to 4192, which in turn would keep the strength in the index the rest of the month. Simply stated, it is likely that the NASDAQ will be a big key this week to what the overall market will do for the rest of the month.

The NASDAQ continues to be the key index due to the strength seen in the tech sector, which in turn seems to be the driving force in the market at this time. It should be noted that even AAPL, the strongest of the index stocks this past week, closed in the lower half of the week's trading range, likely meaning the stock will not help the index go higher either.

Expect the NASDAQ to go slightly higher this week but show weakness at the end of the week.

SPX Friday closing price - 1805

The SPX has now generated 3 weekly closes in a row at the upside objective of 1804/1805, suggesting that the bulls have run out of ammunition to take the index higher. In addition, the index reached the intra-week upside objective of 1812 with a rally to 1813, meaning that further upside above 1813 likely requires additional positive fundamental news to continue higher.

The SPX has now rallied 167 points (almost 10%) in just 9 weeks and finds itself 95 points above the previous all-time weekly closing high at 1709 that is considered the closest support of consequence, and even then it is considered minor support as a previous "high" weekly close. The risk/reward ratio on a purchase above 1800 must be considered less than 1-1, suggesting that the bulls will not be very aggressive at this time.

On a weekly closing basis, there is no resistance above. On a daily closing basis, there is no resistance above. On a weekly closing basis, there is minor support at 1690 and minor again at 1667. Below that level, minor to decent resistance is found at 1632 and decent at 1592. On a daily closing basis, support is minor to perhaps decent between 1781 and 1785, minor to perhaps decent again at 1747, and minor at 1725. Decent to perhaps strong support is found at 1655.

The SPX is now 200+ points above its previous highest levels ever (1550-1576) and considering that new all-time highs generally generate a rally of 15% before a correction is seen back down to the previous highs, the index should not get much above (if any) the 1812 level, which is 15% above the previous intra-week high at 1576 seen in 2007.

To the downside, the SPX shows pivotal support between 1781 and 1785 that if broken on a daily closing basis would generate a short-term sell signal. Further support, and likely somewhat pivotal as well, is found at the 1747 daily close level which also represents the 50-day MA that if broken would offer a signal that the recent uptrend has ended. On a weekly closing basis, the 1690 level is important as a close below that level would give a sell signal on the weekly chart that after 9 weeks of green closes and on a month that is generally biased to the upside (December) would offer a clear signal that the uptrend has paused if not ended.

To the upside, the SPX offers no resistance other than the 1812/1813 area that was the high seen the previous week and represents a 15% appreciation above the previous all-time weekly closing high seen in 2007 at 1561.

The SPX bulls have spun their wheels the last couple of weeks in spite of the fact that the economic news continues to be better than expected and the NASDAQ has prolonged its rally highs. With the index overbought, having reached a viable upside objective, and the near term prospects of negative news coming out, such as the Debt Ceiling issue in January, it has become unlikely that further upside will be seen.

The SPX did close on the highs of the week and further upside is expected to be seen. Nonetheless, the 1808 level is likely to be the high seen this week and probably seen on Monday, suggesting that the rest of the week will be downhill.

The economic news continues to be better than expected but the indexes seemingly have begun to stall as the upside momentum has waned. The indexes have all reached upside objectives where traders are likely to take profits or even begin to institute short positions. Trying to generate further upside above these important psychological resistance levels is a folly as the risk/reward ratios are very bad for the bulls, especially since there is some talk that the Fed may start tapering the Stimulus program in December instead of waiting until March as was expected a few weeks ago.

It should also be mentioned that the indexes usually begin a decent to strong correction in the first quarter of the year with the correction often starting in the first 4 weeks of the year. With this year the traders facing an additional big negative in the form of the Debt Ceiling issue that comes to a head on January 17th, the probabilities are even higher that selling will begin to be seen soon.

The most important economic reports for the month came out last week and though they were better than expected and did generate a rally it was not sufficient to make new highs, likely meaning that the best opportunity to keep the uptrend going has now slipped away. Retail Sales is the only economic report due out this week and it is expected to be better than last month's report. Nonetheless, preliminary figures on Black Friday, as well as in-store sales for the first week of Xmas shopping, have suggested that Holiday sales this year will fall short of what was expected earlier in the year, meaning that if that is true, the bulls will not have any further ammunition with which to generate additional buying in December.