DOW Friday closing price - 16437

The DOW generated a second red weekly close in a row but no important levels of support were broken, or failure signals given, suggesting that the weakness seen might only be a pause in the uptrend. By the same token, the index did generate 4 red closes in the past 5 days, as well as a close near the lows of the week on Friday, meaning that the normal buying of dips was not prevalent this past week and that further downside will be seen this coming week if no positive fundamental news comes out.

The DOW did make a new 2 week low on Thursday and then again on Friday and without any economic news scheduled until Tuesday morning when the Retail Sales number comes out, the probabilities favor the index starting out the week on a negative note. Technically speaking there is no support found close-by so the amount of selling to be seen at the beginning of the week will likely depend on the outlook the traders have for the earnings reports due out during the week.

On a weekly closing basis, there is minor resistance at 16478. On a daily closing basis, there is minor resistance at 16530 and minor to perhaps decent at 16576. On a weekly closing basis, support is minor 15755, minor again at 15072 and decent to perhaps strong at 14799/14810. On a daily closing basis, very minor support is found at 16425 and then very minor again at 16097. Below that level, there is minor support at 15821 and decent at 15739.

The DOW did close on the highs of the month/year and the probabilities continue to favor new all-time highs being made in January above last month's high at 16588. By the same token, the momentum to the upside seen at the end of the year has ended and many traders have stated a lack of desire to buy at these high prices, meaning that the bulls need new positive catalysts to generate the buying interest needed to make a new all-time high. In addition, the index has now tested successfully the previous high at 16588 with a rally this past week to 16562 which does give the bears some chart ammunition to push lower.

To the upside, the DOW shows minor resistance at Tuesday's high at 16565 and stronger at the all-time high at 16588. To the downside, the index shows no previous support whatsoever until the previous high daily close at 16097 is reached, and even then that support is minor as it is from a previous high close. Some "general" support may be found at 16300 but then again no resistance was found on the way up at that level, and therefore none should be expected on the way down. Below 16097, the 16000 demilitarized zone should offer some support, especially since it does include the 50-day MA, currently at 16030. Additional but minor intra-week support will be found at 15865, a bit stronger at 15791 and decent support at 15703.

This coming week the traders will mostly be keying off of the SPX which gets first crack at the important earnings reports with 8 level #1 companies in that index reporting this week (see list below). The DOW will be mostly a follower rather than a leader this coming week, meaning that support and resistance levels in the index will get some respect but will depend on what the SPX does.

The probabilities still suggest that the DOW will get above last month's high at 16588 at some point this month and certainly the first 3 weeks of the earnings quarter usually generate some decent buying interest when the earnings come in better than expected.

NASDAQ Friday closing price - 4174

The NASDAQ generated a bullish reversal this past week, having gone below the previous week's low and then turning around to make a new 13-year intra-week and weekly closing high. The index renewed its leadership that had been lost to the DOW during the previous 4 weeks. Three of its main stocks (AMZN, BIDU, and GOOG) made new highs, reversing the negatives that the other 3 strong stocks in the index (AAPL, NFLX, and PCLN) had ceded the week before. The index closed on the highs of the week and further upside is expected to be seen this coming week with the 4200-4300 area as the objective.

The NASDAQ will not be getting any earnings reports of consequence this coming week and unless the earnings reports in the SPX disappoint strongly (not likely), the probabilities favor further strength this week until those important index earnings reports come out in masse on the last week of the month.

On a weekly closing basis, decent to perhaps strong resistance is found between 4234 and 4246. On a daily closing basis, there is minor resistance at 4176 and then nothing for the past 12 months. On a weekly closing basis, support is minor but indicative at 4131, minor support again is found at 4000, very minor at 3919 and at 3791, and decent at 3589. On a daily closing basis, support is minor to perhaps decent at 4113, minor at 4068, decent at 3993, and minor at 3985. Below that level, support is decent at 3857.

The NASDAQ did close the gap between 4111 and 4127 on Monday, likely meaning that even though the uptrend has resumed that the bears are starting to have some interest and strength as the index gets closer to the 4200-4300 area where resistance of consequence is expected to be found. If the bulls were still in total control it is not likely the gap would have been closed, meaning that closure of the gap does have some meaning.

It is important to note that the 4200-4300 level in the NASDAQ was a strong resistance area during a period of 9 months (between January and August) in the year 2000, both on the way up to the all-time high at 5132 and on the way down when the stock had its first bounce of consequence from 3042. With the index closing on Friday at 4174, and the weekly close resistance being strong between 4234 and 4246, it does suggest that on a weekly closing basis the index is only 60-70 away from an area where strong selling will be seen. Intra-week the chart does show decent possibilities of a rally as high as 4289 though on the way up in January 2000 the index did get up to 4303 before selling appeared. The probabilities favor the lower levels stopping the rally and generating a strong correction.

The NASDAQ is likely to go higher this coming week as there are no earnings report of consequence in the index due out. NFLX is the first major stock in the index to report earnings and that won't happen until Wednesday the 22nd. AAPL, AMZN, BIDU, and GOOG report the following week after.

To the downside, the NASDAQ will now show decent support at last Monday's low at 4103. A break of that support will be a sign that selling is increasing and that a top is near or been made. The pivotal support is down at the 4000 level (specifically at 3979) that if it gets broken would definitely signal that a correction of consequence is occurring. The probabilities do not favor that happening until after the bulk of the important earnings reports come out.

Expect further upside to be seen this week in the NASDAQ but also expect to see a bit more volatility in the trading as the bears step up their selling interest on rallies above 4200.

SPX Friday closing price - 1842

The SPX, in conjunction with the NASDAQ but in contrast with the DOW, generated a new all-time weekly closing high on Friday, above the previous high weekly close at 1841. The index closed on the highs of the week and further upside is expected to be seen this week with 1855-1875 as the upside objective.

The SPX will be in the spotlight this week with 8 important stocks in the index reporting earnings (JPM, WFC, BAC, C, GS, AXP, MS, and GE). The traders are likely to key their trading this week on what these earnings reports show, though it must be mentioned that in the past earnings reports from financial firms have not been all that catalytic and often causing sell-offs even after the earnings reports come in better than expected. Nonetheless, with the indexes mostly into new highs and little to stop the market this coming week, the reports would need to be negative in order to see any selling of consequence occurring.

On a weekly closing basis, there is no resistance above. On a daily closing basis, there is minor resistance at 1848. On a weekly closing basis, there is minor to perhaps decent support at 1775, minor support at 1690 and minor again at 1667. On a daily closing basis, support is minor to perhaps decent at 1826, very minor at 1808, minor at 1885 and 1881, and minor to perhaps decent at 1775. Below that level, there is minor but indicative support at 1747.

The SPX did not make a new all-time intra-week high above 1849 even though the index did make a new weekly closing high. With important earnings reports due out this week, it is evident that next week's close is going to be important as a red close would build a double top on the weekly closing chart at 1841/1842. Nonetheless, the probabilities do favor the index making a new intra-week high above last month's high for the very same reason mentioned above in the DOW evaluation.

It should also be mentioned that at the end of the week traders could be making decisions on whether the SPX will continue higher or set itself up for a correction of consequence, likely depending on how the earnings reports came out. My personal belief is that earnings reports will mostly disappoint even if slightly better than expected. Though the NASDAQ could continue higher after this coming week, for at least 1 more week, it is possible to think that the SPX will begin to show selling interest once the earnings reports are out.

Expect higher levels in the SPX this week, with a decent probability of the index getting up intra-week to 1855. Nonetheless, next Friday's close will probably be important or indicative.

The earnings quarter starts in earnest this coming week with many of the important financial industry stocks reporting earnings. The first 3 weeks of the earnings quarter usually causes stocks to go up in value though volatility and 2-way trading are often seen during these periods, as earnings can be a mixed bag. The bulls were able to dismiss several economic reports that came in lower than expected this past week and close 2 of the 3 indexes in either new or multi-year weekly closing highs. Probabilities favor further upside seen this coming week as there still has not been any negative statement made on the charts.

The Debt Ceiling issue is not yet on the immediate radar as February 7th is the date when the recent compromise on the Debt Ceiling expires. As such, that issue will not be in the minds of the traders for several weeks, meaning the traders will start trading the market based on earnings. With the most important earnings reports due out the following week and then the next, this coming week is not likely to generate the kind of trading interest that would cause decisions to be made. In addition, other than Retail Sales on Tuesday morning, the economic reports calendar for this week is relatively passive. It should be mentioned that the most important earnings report of the week in GS is not due out until Thursday morning, likely meaning that the traders will not do much to "upset the applecart" at the beginning of the week.

Nonetheless, it is my belief that a strong correction is on the horizon and that the beginning of such a correction is likely to occur either the following week or the week after.