DOW Friday closing price - 16029

The DOW generated a sell signal on the weekly closing chart when it closed on Friday below the previous low weekly close at 16065. The strong selling interest was likely a technical response to the failure to follow through to the new all-time high that was made the previous week, especially since the economic reports that came out this week were positive in nature. The sell signal was indicative as it suggests that at least a temporary top to the rally has been found and that the bulls will require "strongly positive" fundamental information to regenerate the uptrend as mildly positive news (as seen this past week) is no longer having an effect.

The DOW closed on the lows of the week and further downside below last week's low at 16015. More importantly, the 16065 level was the only support level that had been built over the past 2 months since the index rallied from the 15340 low seen the first week of February, meaning that a drop down to the next support level at 15700 could be seen this week. It also suggests that the reasons for the 1290 point rally from 15340 to 16630 rally have now faded and could be totally erased if strong follow through to the downside is seen.

On a weekly closing basis, there is minor resistance at 16412, decent at 16452 and strong at 16478. On a daily closing basis, there is now minor resistance at 16248, decent at 16437, and strong between 16572 and 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 15821, minor to decent at 15739 and strong at 15372.

The DOW chart now shows a strong and clearly built double top on the daily closing chart at 16576 and 16573 that includes 1 successful retest at 16456 seen this week, as well as 3 successful retests on the weekly closing chart (16458, 16452, and 16412) of the high weekly close at 16478. The successful retests on both charts strongly suggests that a top is in place and that the bulls will need some powerful positive earnings and economic news to reverse. The sell signal given on Friday, if confirmed with another red close next Friday, is a distinct indicator that the bulls are no longer in control and may even lose the defensive battle to defend the support levels below.

To the downside, the DOW shows very minor intra-week support at 15865, minor at 15791, and minor to perhaps decent at 15703. Last week's trading range of 441 points, break of daily and weekly close support, and close on the lows of the week does suggest that the index will see follow through and a drop down to the 15700 level this coming week. The chart action implies that a third retest of the 200-day MA, currently at 15750, will be seen this week before any indicative buying is seen. To the upside, the DOW will show minor resistance between 16174 and 16221 that if broken would suggest the selling pressure is abating. Decent and indicative resistance is found at 16456 that if broken would likely generate "new" buying interest.

In looking at the DOW chart, there is little to be positive on, at least for the short term. The index closed on the lows of the day/week and with the only important recent support broken, the probabilities favor another strong week of selling. It is difficult to have confidence in shorting the market right now since the first 3 weeks of the earnings quarter usually has an upward bias and a lot of volatile reversals from one day to the other. Nonetheless, the bulls failed at every pivot point this past week and if no positive fundamental information comes, it is likely that the downside objectives will be seen.

NASDAQ Friday closing price - 3999

The NASDAQ was the hardest hit index this past week, having fallen 3.2% in value compared with the DOW at 2.4% and the SPX at 2.7%. The tech sector and the stocks that have led the rally (such as PCLN, GOOG, AMZN, NFLX, etc) led the way down as the bulls took long term profits on those investments, suggesting that for the time being the uptrend is over.

The fall in price in the NASDAQ caused the first weekly close sell signal since August 2011 to be given on Friday and the close on the lows of the week suggests that further downside will be seen before any buying interest is uncovered.

On a weekly closing basis, minor to perhaps decent resistance is found at 4197, very minor at 4276 and decent resistance is found at 4336. On a daily closing basis, very minor resistance is found at 4123, minor at 4183, minor to perhaps decent at 4243 and at 4276. On a weekly closing basis, support is minor to perhaps decent at 4000, minor at 3919, and at 3791, and decent at 3589. On a daily closing basis, support is minor at 3921, minor again at 3857, and minor to perhaps decent at 3677.

The NASDAQ had an indicatively negative chart week, having broken the 100-day MA for the first time in 16 months, generating the first weekly close sell signal in 32 months and closing at the 4000 level for the third time this year, suggesting that even if a green close is seen this week that further downside would still likely be seen thereafter as triple bottoms usually are broken. In addition, during the past 5 weeks the bulls have been totally unable to generate any kind of buying interest as the index has produced 5 weeks in a row of lower highs than the previous week and 4 weeks in a row of lower lows, meaning that a complete turnaround would likely require better-than-expected earnings reports in the big stocks. With only GOOG reporting this coming week, a recovery is not likely to happen this week.

To the downside, the NASDAQ has only very minor close-by support below the 4000 demilitarized zone. Intra-week support from the low seen in February is found at 3968 but below that level there is only very minor support at 3855 and minor support at 3650. Further but still minor support is found at 3573 and then nothing until minor to perhaps decent support is found at 3294. To the upside, the index shows minor resistance at 4081, minor again at 4135, decent and possibly pivotal at 4185, and decent possibly strong at 4246.

It is difficult to determine how low the NASDAQ could fall if the 4000 level is broken decisively. Nonetheless, going back to the January 2000 when the index was on its way up to the all-time high at 5132, the index had one month where it took a fast fall from 4303 down to 3711. With the 4300 and 3700 levels being considered "general" resistance and support levels, it can be assumed that if the index breaks 3968 this week and closes on Friday below 3998, that a drop down to or close to 3700 will be seen.

It should also be mentioned that since January 2012, the NASDAQ has only broken the 50-week MA once (November 2012) and then only briefly for 1 week. With the 50-week MA currently at 3865 and a very minor intra-week support found at the same price, there is a decent chance that if further selling is seen that it will be the downside objective for this week.

Based solely on charts, the NASDAQ should continue to see lower prices this coming week.

SPX Friday closing price - 1865

The SPX generated the first sell signal on the weekly chart since May 2012 when the index closed below the most recent low weekly close at 1841. The sell signal is not a major one as a close below 1782 would need to be seen for that to occur. Nonetheless, the sell signal given in May 2012 was also a minor one but did cause the index to fall 10.6% over a period 5 weeks and with the index having fallen only 4.4% so far, it does suggest another 6% drop from Friday's low (down to 1700) could be seen over the next 5 weeks.

The SPX did close on the lows of the week and the index shows no intra-week support on the weekly chart until 1772 is reached, meaning that if follow through is seen the possibilities of another 43 point drop occurring are high. Having seen a 58 point drop this past week, a drop of 43 points is certainly considered viable.

On a weekly closing basis, there is minor to perhaps decent resistance at 1841, minor to perhaps decent again at 1866 and decent resistance at 1878. On a daily closing basis, there decent resistance between 1841 and 1848, minor to perhaps decent at 1872, decent at 1878 and decent to perhaps strong at 1890. On a weekly closing basis, there is minor support at 1805 and decent at 1775/1782. Below that level, there is no support until minor support is found at 1709. On a daily closing basis, there is very minor support at 1809, minor to perhaps decent at 1780, and decent to perhaps strong at 1741.

The SPX will be the index to receive the most important earnings reports this week as C reports on Monday, BAC and AXP on Wednesday, and GS and MS on Thursday. The only other reports of consequence due out this week in other indexes are IBM and GOOG on Wednesday afternoon. Earnings reports in the financial industry have not been all that catalytic-to-the-market in the past and therefore not likely to be catalytic this week either. With the indexes already under sell pressure, it is unlikely that the reports due out this week will make much difference even if they come in better than expected.

The SPX closed on the lows of the week on Friday and further downside is expected to be seen. The 1800 demilitarized zone has not shown much strength in the past and it is not expected to show much support now either. By the same token, the 1805/1809 level on a daily closing basis was somewhat pivotal resistance several times early this year and may prove to be support at this time. On the other side of the coin, the index shows no intra-week support until 1767/1772 is reached and as such the chances of the index getting down that low if follow through to the downside is seen are high. It is also important to mention that the 200-day MA, currently at 1764, has not been reached during the past 15 months but with sell signal given for the first time in 2 years, the probabilities of the line being reached is now high. By the same token, it is highly unlikely that line will be broken the first time around, and therefore a bounce back up would be expected if reached.

To the upside, the SPX will now show pivotal resistance at 1842/1848 and if the most recent high at 1872 is broken, new buying of consequence will likely be seen.

Probabilities now favor the SPX trading between 1767 and 1842 for the next few weeks until the first 3 weeks of the earnings quarter are done. At such a time, and based on the earnings results as well as the next ISM Index and Jobs report due out in 3 weeks as well, a longer term direction will likely be established.

The indexes all gave sell signals on the weekly charts, suggesting that at least a temporary top is now in place and that further downside will likely be seen this week. The sell signals were even more telling as there was no negative catalyst for the selling to appear and even less so for being so successful, meaning that long-term profit taking was seen on a big scale and that the bulls now require powerful positive earnings reports to have any hope of turning things around.

Earnings reports this week, with the possible exception of GOOG on Wednesday, are not important enough to cause a change of momentum, likely meaning that the bears will remain in control for now with the bulls mostly on the defensive. Retail Sales on Monday could generate some reaction but with the report generally being volatile in nature, it is unlikely it could be good enough to change last week's momentum around.

The big question in the minds of the traders right now is whether the traders will wait for the bulk of the earnings reports to come out before further downside of consequence is seen or whether the correction is now "a given" and the market will continue lower without waiting for confirmation from earnings. The probabilities favor some further downside this week but a bit of recovery before the important earnings reports in stocks like AMZN, AAPL, and NFLX come out the following week.