DOW Friday closing price - 17755

The DOW generated a second-in-a-row red weekly close and on the lows of the week, suggesting that a top to this rally has been found and that further downside will be seen this coming week. The index has now fallen 3% from the 16174 high (471 points) and is likely in the process of testing the previous all-time high weekly closes at 15658/16576 before the traders decide whether to resume the uptrend or head into a much expected correction of consequence seasonally seen in the first quarter of the year.

December trading ranges in the DOW have generally averaged 404 points during those years like this one where there was nothing of consequence occurring (6 out of the last 9 years, with the exceptions being 2007-2008 when the recession and recovery were occurring). The high trading range during those 6 uneventful years was 483 and the low range being 231. With the index having already traded in a 395 point trading range this month and some further downside likely to occur this coming week, the probabilities are high that most of the trading range for the month has been seen and that no new all-time high will be made this month.

On a weekly closing basis, there is minor to perhaps decent resistance at 16068. On a daily closing basis, there is minor resistance at 15976, minor to perhaps decent at 16025, and decent 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, very minor support is found at 15739, minor support between 15658 and 15680, minor again between 15409 and 15413. Below that, minor to perhaps decent support is found at 15168 and decent between 14960 and 14996.

The DOW has received mostly good economic news the past 2 weeks but the reaction to the news has been negative, mostly due to the fact that good economic news likely suggests the Fed will consider tapering of the Stimulus program sooner rather than later. The FOCM meeting occurs this coming week and the announcement of any decision will come out Wednesday at 2:00 pm. Announcement of the tapering program could be a catalyst for further downside, while no announcement would likely bring back buying interest and a retest of the highs.

To the downside, the DOW shows general support at 15700 as well as minor support at the previous all-time high weekly close at 15658/15676. It should be mentioned that the 50-day MA is currently at 15650, giving that area additional reasons to be seen but also to hold up. Further minor support is found between 15522 and 15544 but if broken no support is found until the 200-day MA, currently at 15195. To the upside, the DOW does not have any resistance until 16030 is reached, and a bit stronger at the most recent high at 16058. Further resistance is found at 16120 and the strongest resistance is at the all-time high at 16174.

Christmas is a time when traders generally reduce their trading interest and as mentioned above, the DOW has shown mostly low trading ranges during past Decembers. The economic reports of consequence for the month are already out and the only thing still in doubt is the schedule for the tapering of the Stimulus program, which will likely be released on Wednesday. With the Debt Ceiling issue still on the horizon for January and the fact the index usually generates a correction of some consequence in the first quarter of the year, it is unlikely that the traders will get very aggressive to the upside.

Probabilities do favor the DOW trading the next 3 weeks between 15650 and the demilitarized zone at 15970/16030. It is likely though, that the lows for the month have not yet been seen but will be seen this coming week, likely before Wednesday's Fed announcement.

NASDAQ Friday closing price - 4000

The NASDAQ generated a key reversal this past week having made a new 13-year high at 4081 and then closing below the low seen the previous week at 4004. The key reversal seems to be a strong sign that the index has now generated at least a temporary top to this rally that is not likely to be broken the rest of the year. The red close was the first in the last 5 weeks but more importantly it made last week's close at 4062 into a successful retest of the weekly close high seen in the year 2000 at 4069, meaning that there was a chart reason for the index closing in the red this past week.

The NASDAQ has been the leader to the upside on the coattails of the tech industry which has been on fire recently. Nonetheless, 4 of the 6 main stocks in the tech sector (AAPL, AMZN, GOOG, and PCLN) all generated red weekly closes and the other 2 (BIDU and NFLX) were not impressive in their green weekly closes, suggesting the tech sector is also likely to have found a high for the year as well.

On a weekly closing basis, minor to perhaps decent resistance is found at 4062/4069. Above that level, decent to perhaps strong resistance is found between 4234 and 4252. On a daily closing basis, minor resistance is found at 4059 and decent at 4068. 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 very minor at 3998 and minor at 3985. Below that level, support is minor to perhaps decent at 3921, minor at 3907, and minor to perhaps decent at 3857.

The NASDAQ seems to be mimicking what happened in December 1999 when the index generated a red weekly high close at 4069 and then proceeded to drop down to 3902 and then on down to 3711 in January of the following year, before resuming the uptrend. The reversal seen this past week is highly likely to stimulate further profit taking at this time and a drop down this week (or the following) to 3900. It should be noted that the index has built some support at 3899 and more at 3855, meaning that chart-wise the scenario is certainly viable.

To the downside, the NASDAQ shows support at the 50-day MA, currently at 3935, and then at the most recent intra-week low at 3911. Further support is found at 3887 and then a bit stronger at 3855. It should be mentioned that the 100-day MA is currently at 3810 and moving up and during the past year the 100-day MA has not been broken at all (tested successfully twice). The 50-day MA has been tested successfully 4 times and only broken the 2 times the index dropped down to the 100-day MA. To the upside, the NASDAQ now shows minor to decent resistance at 4069 and decent at 4081.

The NASDAQ saw spike down action on Wednesday, having dropped 67 points that day. There has been no recovery seen the last 2 days and the probabilities favor further downside this coming week, likely down to the 50-day MA, currently at 3935. Based on past history this year with the MA lines, it is likely the index will drop below the 50-day MA one day, possibly down to 3900, and reverse directions the next day with the intent of testing the highs before the end of the year.

SPX Friday closing price - 1775

The SPX generated a negative reversal week, having made higher highs and then a close below last week's low. In addition, the red close made last week's close at 1805 into a fulfillment of the upside weekly close objective, suggesting that a top to this rally might now be in place. With the intra-week rally this past week to 1811, it can be said that the index has also now successfully retested the all-time intra-week high at 1813, meaning that the chart could now be fulfilled with no further need to another retest of that level.

The SPX now also shows a double top on the daily chart with the 1813 high seen on 11/29 and the 1811 seen 12/9. Those 2 highs were followed up with a 22 point spike drop on Wednesday that has not yet generated any reversal action. The index did close on the lows of the week and further downside is expected to be seen this coming week.

On a weekly closing basis, there is minor to perhaps decent resistance at 1805. On a daily closing basis, minor to perhaps decent resistance is found at 1798 and decent at 1807/1808. 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 at 1771 and minor to perhaps decent again at 1747. Below that level, there is minor support at 1725 and decent to perhaps strong support is found at 1655.

The SPX has now reached the upside objective, considering that 1805 represents a 15% rally from the previous all-time high weekly close at 1561. It should be mentioned that 4 weeks ago the index reached the high weekly close at 1804 and for the next 2 weeks after that, the bulls were unable to generate any further weekly close upside by more than 1 point. It should also be mentioned that the index generated a sell signal this past week on Thursday with a close below the previous low daily close seen during the past 4 weeks at 1781. The sell signal was confirmed on Friday with a second close below that level, suggesting further downside is forthcoming.

To the downside, the SPX shows minor intra-week support at 1760, including the 50-day MA at that same price, and pivotal support at 1746, which is the lowest intra-week low in the last 8 weeks. A break below 1746 would suggest further downside at least to 1725, which is where the previous high daily close is located, as well as the 100-day MA. To the upside, the SPX chart shows minor to perhaps decent resistance at 1802 and decent resistance at 1813/1811.

The SPX has fully fulfilled its upside objectives and has in turn given a sell signal, meaning that the bulls will not have any chart support at this time. It also means that in order for the index to turn around and make new all-time highs, strong fundamental news will need to be released.

Expect further downside to be seen this week in the SPX, with probably the 1760 level as the main objective. One more rally back up to 1798 is likely to be seen before stronger selling comes in.

The economic news continued to be better than expected this past week but the bulls were unable to keep the rally going, suggesting that further upside will require even better fundamental news than what has been seen so far. The economy is getting better but slowly and at the present rate of growth, further upside of consequence is not likely to be seen. Nonetheless, the timing of the Fed tapering program can make a short-term difference as the market has begun to factor in the tapering but mostly in March. If the Fed decides to begin tapering sooner, it will have a stronger negative impact.

The Fed is likely to make a decision on Wednesday of this week, regarding when to begin to taper, and that is likely to make a difference as to what the index will do the rest of the month. Nonetheless, the mid-term prospects for the next 4 months are mostly on the negative side due to the seasonal tendency for a correction of consequence to occur in the first quarter of the year, as well as to the negative uncertainty of the Debt Ceiling issue due to be addressed in the first couple of weeks of January.

Probabilities favor the Fed continuing the tapering program as is for now and for the indexes to trade the rest of the year with a slight upward bias but without new all-time highs being made. Nonetheless, any announcement of the tapering program starting early, could cause the market to unseasonably fall in December.