DOW Friday closing price - 16103

The DOW generated a negative reversal having made a new 4-week high and then closing in the red and in the lower half of the week's trading range, suggesting further downside will be seen this week. In addition, the red weekly close does make last week's close at 16154 into a successful retest of the all-time high weekly close at 16478 as well as construct what could be the right shoulder of a bearish Head & Shoulders formation that if the neckline at 15698 is broken would offer a weekly close objective of 14918.

The bulls tried very hard on Friday to rally the DOW above Wednesday's high at 16225 (got up to 16191) and hopefully produce more momentum to the upside and new buying interest from another green weekly close. Nonetheless, in spite of the NASDAQ making a new 13-year intra-week high on Friday, the index got below the previous week's close at 1:30pm and the bulls were unable to get the index above that level for the last 2.5 hours, meaning the bulls lost the battle.

On a weekly closing basis, there is minor resistance at 16154 and strong resistance at 16458/16478. On a daily closing basis, there is minor resistance at 16133 and a bit stronger at 16154. Above that level, there is minor resistance at 16257, decent at 16481 and strong at 16576. On a weekly closing basis, support is minor to perhaps decent at 15698, minor at 15665, minor again at 15072 and decent to perhaps strong at 14799/14810. On a daily closing basis, there is minor support at 16040, minor again at 15821 and minor to decent at 15739. Below that level, there is minor support between 15658 and 15676, and then nothing until the now decent support at 15372.

Though the red weekly close in the DOW has to be considered a negative, in looking at the daily chart the index is showing what could be a bullish flag formation with the flag being the rally from 15863 to 16225 and the flag being the trading range between 16006 and 16225. A break above 16225 would offer an objective of 16587 which would be only 1 point below the all-time high at 16588, making it a very viable objective. The flag formation is not a classic one, meaning it is not as dependable as it might normally be and is probably there because the NASDAQ had a strong week and is giving mixed signals of the market. A green weekly close in the NASDAQ next Friday would stimulate further buying interest and the traders in the DOW would likely follow. Simply stated, the traders have left the door open for higher or lower prices depending on what the other index does. Parameters in the DOW for this week are 16006 and 16225, with a break of either level likely being indicative of further and more definitive action.

To the downside, the DOW shows support at 16006, a bit more important and meaningful at 15863 (which does include the 100-day MA) and at 15703, which is a decent to strong support from a previous low. A break below 15703 is likely to cause the index to move down and retest the 200-day MA, currently at 15540, for a second time in the last 14 months, suggesting that the weakness seen in the index now is more significant than previously thought to be. It is evident that if the line and the previous low at 15340 are broken, that the objective of the H&S formation at 14918 would likely be fulfilled.

It is also evident that everyone in the DOW is presently watching the NASDAQ as that index is trading at a level of strong resistance that if broken would likely generate a new and aggressive buying spree in all indexes. As such, the chart points in the DOW are only there to give the traders clues as to what is likely to happen "elsewhere". The probabilities do favor the bears though, because everything is depending on one index and it is difficult to believe the main stocks in that index can continue much higher without a pullback first.

NASDAQ Friday closing price - 4263

The NASDAQ made a new 14-year weekly closing high on Friday, having closed above the important July 2000 weekly closing high at 4246. The index closed in the upper half of the week's trading range, suggesting further intra-week upside will be seen this coming week, above last week's high at 4284. By the same token, the index failed to get above the intra-week high seen in January 2000 at 4303 or the high seen in July 2000 at 4289, meaning that the bulls need to accomplish more this coming week before victory can be claimed.

The NASDAQ toiled to go higher this past week, having closed only 19 points higher than the previous week and having only a 59 points trading range compared to the previous week's trading range of 138 points. In addition, on the daily chart the index did generate a negative reversal on Friday as the new 13-year high at 4284 was made but then the index closed in the red and on the lows of the day, suggesting the first course of action for the week will be to the downside.

On a weekly closing basis, decent to perhaps strong resistance is found at 4963 and major is found at the all-time high at 5048. On a daily closing basis, there is minor resistance at 4072. Above that level there is no resistance for the past 12 months. On a weekly closing basis, support is minor at 4103 and decent at 4000. Below that level, there is minor support at 3919, and at 3791, and decent at 3589. On a daily closing basis, support is minor at 4237, minor to perhaps decent at 4113, minor at 4051 and decent at 3996/3998.

The NASDAQ is likely facing the most indicative chart week in the last 13 years as a break above 4303, in conjunction with another green close next Friday, would suggest that the new target will be the all-time high at 5132, which is another 869 points above Friday's close. It is difficult to believe fundamentally that those highs could be reached at this time since the economy is not showing the kind of growth that would support such a rally. Nonetheless, several of the stocks in the index, such as PCLN, GOOG, and NFLX are into new all-time highs and have not yet shown any action that would suggest they are ready to correct downward, meaning that the direction of the index this week is almost a "flip of a coin".

It should be mentioned that the NASDAQ is carrying the load on its shoulders alone since both the other indexes gave notice on Friday, with red weekly closes, that further upside is not going to happen on their watch unless the NASDAQ pulls them up. With the price levels so pivotal in all the indexes, it is likely some decision will be made this week.

To the upside, the NASDAQ shows intra-week resistance at 4289 (July 2000 high) and at 4303 (January 2000 high) but above those numbers there is no intra-week resistance until 5078 is reached. To the downside, Thursday's low at 4226 is support that if broken would likely take the index down to the next minor support at 4170. Further and stronger support is found between 4097 and 4103. Any daily close below the previous high daily close seen on January 22nd at 4243 would likely be indicative of further downside. Any weekly close below the previous high weekly close at 4197 would also be indicative that at least a short-term top to this rally has been found.

It should be noted that the NASDAQ could be in a trading range between 3700 and 4300, which are both "general" support resistance levels found 300 points above and below a major level such as 4000 is. In fact, in January 2000 when the index was on its "way up" to the all-time high at 5132, the index got up to 4303 and a week later it was down to 3748, before the rally continued. Based on the action seen last week and the new 14-year high weekly close, it would seem that scenario is now the most likely to occur.

SPX Friday closing price - 1836

The SPX generated a red weekly close on Friday, suggesting that a successful retest of the double top weekly close at 1841/1842 has occurred. If confirmed next week with another red weekly close, the probabilities of a major top having been made will increase exponentially. A break below the low seen 2 weeks ago at 1737 would "seal the deal". By the same token, the SPX is now showing multiple (6) intra-week highs between 1844 and 1850 that suggest that they will be broken before any serious consideration is given to the downside.

The SPX closed exactly in the middle of the week's trading range, likely meaning that the traders are still unsure of what direction the index will take this week even though a red weekly close was generated. It is likely the traders are waiting for a catalyst to occur before any strong decisions are made and since the index has mostly been following the NASDAQ, the catalyst could be whatever that index does this coming week. Simply stated, the immediate direction of the index is likely in the hands of the NASDAQ traders.

On a weekly closing basis, there is decent resistance at 1841/1842. On a daily closing basis, there is minor resistance at 1840, minor again at 1842 and decent at 1848. On a weekly closing basis, there is minor support at 1781 and decent support at 1775. Below that level, there is minor support at 1690 and minor again at 1667. On a daily closing basis, support is minor but possibly indicative between 1826 and 1828, minor to decent at 1819 and minor at 1805. Below that level, there is decent support at 1775 and then nothing until decent support is found at 1741. Below that, there is decent support between 1700 and 1710.

Even though much is riding on what the NASDAQ does this week, the SPX has either built a brick wall up at 1850 or a magnet for a break. The probabilities favor a break of that resistance since multiple highs usually are broken. The only time that I could find that could even begins to compare with what has happened in the index over the past 9 weeks was the last all-time high was made in 2007. In 2007 the index generated 5 weekly highs in a row between 1532 and 1540 then a new high was made at 1555 followed by a correction down to 1370, and then followed by another new high at 1576, from which a long-term downtrend began. On this occasion, the index generated 5 weekly highs in a row between 1844 and 1850, "followed" by a correction down to 1737, and now the index is back up to the previous highs. Nonetheless, since those previous highs were not broken before the correction occurred (unlike 2007), it could mean that a brick wall has been built.

Based on the information above, there are 3 scenarios that are possible in the SPX, with 1) a brick wall has been built, 2) the multiple tops will be broken by anywhere from 5-15 points and then a downtrend begin, and 3) new highs made and the uptrend resume with 1900+ as the upside objective. The chart is not yet giving any clear clues as to which of the scenarios is the most likely to occur, and probably won't give a clear sign until either the recent low at 1737 is broken or the index gets above the most recent high at 1850 by more than 15 points.

On a very short-term basis, support is found at 1824 and again at 1809/1815. If the 1809 level gets broken, the bears will gain the edge again.

The SPX for this week will be dependent on what the NASDAQ does.

The indexes continue to give mixed signals with the NASDAQ suggesting higher, the DOW suggesting lower, and the SPX in the middle. Simply stated, nothing has changed or was decided last week. By the same token, the NASDAQ traded within 20 points of what could be considered a major pivot point resistance, meaning that the probabilities are now high that something will be decided this coming week as there is "no more room" for uncertainty to continue.

It is important to note that this coming week is full of economic reports of some consequence from which the traders could decide on a direction. On Tuesday, the Consumer Confidence and 20-city Case/Schiller reports come out, on Thursday the Durable Goods report comes out, and on Friday the 2nd estimate of GDP as well as Chicago PMI reports come out. Though none of these reports are alone called catalytic, as a group they could give enough information for the traders to make what are "pivotal" decisions this week. As it is, the indexes have moved up even though the economic reports have generally been disappointing, but that kind of situation cannot continue for long if the economy is not improving and the Fed is pulling back Stimulus.

One thing that does stand out for this coming week is that the NASDAQ is the index the traders will be looking at for decisions. It is on the shoulders of that index that the traders will likely decide what to do. The main NASDAQ stocks have "ruled the roost" for the past few months and that was further accentuated on Friday when PCLN reported earnings and the stock yet again made new all-time highs in an impressive manner. What the traders consider further upside is likely to be seen in those main stocks is likely what will decide the fate of the market at this time.