DOW Friday closing price - 16987

After 15 straight days in a row of closing above the 17000 level (but not being able to get more than 160 points above it) the bears in the DOW were finally able to accomplish a close below that level on Friday. The 15-day low does suggest that the buying interest has waned as there were no negative fundamental reasons for the weakness seen this week. In addition, a failure to follow through signal was given on Friday when the index closed below the previous all-time high weekly close at 17100 after having broken it the previous week with a close at 17137. The index closed near the lows of the week and further downside is likely to be seen this week.

The DOW made a new all-time intra-week high on July 17th at 17151 but in spite of the index getting above the 17110 level on 15 different occasions during the past 8 weeks and economic news coming out generally positive for the market, only 2 new highs were made and then only by 2 and 9 points (at 17153 and at 17160), meaning that further upside will likely require a strong fundamental reason for new buying interest to appear. It is unlikely such a reason is forthcoming at this time.

To the upside and on a daily closing basis, the DOW now has a strong double top resistance at 17138/17137 (intra-week between 17151 and 17160). On a weekly closing basis, decent to perhaps strong resistance is found at 17100 and 17137. To the downside, the DOW now shows pivotal daily close support at 16970. Below that level and also on a daily closing basis, minor support is found at 16906 and at 16826 and a bit stronger at 16734. On an intra-week basis though, no support is found until minor to perhaps decent support at 16805. Further and a bit stronger support is found at 16703 and then nothing until the 200-day MA, currently at 16500.

The DOW is likely to continue to head lower this week as support levels were broken that should not have been broken if the uptrend was intact. This coming week there are quite a few economic reports due out (every day from Monday through Thursday) that normally could make a difference. Nonetheless, it needs to be mentioned that for the past couple of months good news has not been a strong catalyst for new buying to appear, meaning that either the news has to be extremely good or extremely bad to generate trading interest. It should also be mentioned that extremely bad news would likely cause the index to rally as it would suggest the Fed will keep interest rates low for a longer time. Neither of those options is likely to occur.

On a daily closing basis, the bottom of the demilitarized zone at 16970 has to be considered a pivot point. If the DOW closes any day below 16970 it would likely mean the index will drop down to the important and indicative level of support at 16700 and that the rest of the month the index would trade between 16700 and 17000 as the traders await the beginning of the next quarter earnings reports. In fact, the probabilities do favor this scenario being the most likely to occur.

Any new high above 17160 would now be considered a strong positive. Probabilities slightly favor the bears this week.

NASDAQ Friday closing price - 4567

The NASDAQ had an inside red close week and a close in the lower half of the week's trading range, suggesting the probabilities favor further downside below last week's low at 4544. Nonetheless, the 4542 level has been support since August 25th and the action on Friday was not bearish enough to suggest the support level will be broken at this time. The index has been trading sideways within a 68 point trading range between 4542 and 4610 for 15 days in a row and flip-flopping red and green closes with no more than 2 in a row in any direction, meaning that there is no reason at this time to believe that pattern is about to change.

The NASDAQ was overdue for a pause as the index had generated 5 green weekly closes in a row prior to Friday's red close. In addition, Friday's red close was only 12 points below last week's close, meaning that it was not sufficiently red to be considered anything more than just a "small" pause.

The NASDAQ did close slightly in the bottom half of the week's trading range and further downside below 4544 is the most likely scenario but it is not a high probability since the index is still in a strong uptrend. With 12 trading days left in the month and only 134 points from the all-time high monthly close at 4696, the index only needs to average a gain of 11 points per trading day to reach its goal by Tuesday September 30th. The desire of the bulls to make such a statement of bullishness should keep the buying outpacing the selling and the index outperforming the other indexes unless a negative catalyst comes out.

By the same token, if the index is mirroring what happened in September 2012, the index might have already made its high as in 2012 the high for the month was made on the second week and though a retest of that high was seen at the end of the month, causing the index to close near the high of the month, the early month high was not broken.

To the upside and on a weekly closing basis, the NASDAQ shows very minor resistance at 4582 and then no resistance until 4963 is reached. On a daily closing basis, resistance is found at 4591, at 4592 and at 4598. The all-time high weekly close is at 5048. On a monthly closing basis though, the all-time high monthly close is at 4696. To the downside, the NASDAQ will show minor daily close support at 4562, at 4557, and at 4952 but on an intra-week basis the support at 4542/4546 could be short-term pivotal as there is no support of consequence until the 4495-4500 level is reached.

The NASDAQ is likely to continue to outpace the other indexes as it has a clear upside objective where the others don't. Nonetheless, it is also in a position that any break of the support levels mentioned above will likely bring about duplication to the downside of what has been seen to the upside during the past 3 weeks (a rally of 68 points). The 4485 level, especially on a closing basis, is now likely an important pivot point for the longer term that if broken would bring in new selling. By the same token, the 4696 level beckons with much allure as it is represents a return of the index to the glory days of the Dot.Com era back in the year 2000. These 2 levels denote objective as well as failure, meaning that any trading within that 211 point trading range will be considered mostly uneventful.

The action in the NASDAQ this coming week could be determined by what the other indexes do but the probabilities slightly favor the upside as the DOW has not yet convincingly broken support and the SPX is at a pivot point support level that should hold up unless the uptrend is broken, and there are yet no tell-tale signs of that having happened. In addition, with the exception of PCLN, the main stocks in the index (AAPL, AMZN, FB, GOOG, and NFLX) have not yet given any signs that the uptrend is over.

The NASDAQ is likely to show a bit of weakness at the beginning of the week with 4544/4546 as the downside objective. Nonetheless, after Wednesday's FOMC meeting, the index should be heading higher once again and testing the 4610 high.

SPX Friday closing price - 1985

The SPX had the first red weekly close in the past 6 weeks and did close near the lows of the week suggesting further downside below last week's low at 1980 will be seen this week. In addition, the index did generate a new 16-day low as well as a close slightly below the previous all-time high daily close at 1987, meaning that the probabilities are high that follow through to the downside will be seen this week.

It certainly is not unusual for the SPX to straddle for a few weeks a major psychological level such as 2000 is, before some decision on the longer term is made, meaning that a dip below 2000 could be seen as part of the process. With no fundamental reasons yet seen to think that a top to the rally has been made, this move down will likely be considered just a dip and not a correction or the beginning of a downtrend.

Nonetheless, the probabilities seem to be elevated that the SPX is mirroring what happened in September 2012 and on that occasion the high for the month was made on the second week of the month and though that high was tested 3 weeks later, it was not broken or even reached, meaning that 2011 level seen last week might end up being the high for the year.

To the upside, the SPX will show weekly close resistance at 2007 (2011 on an intra-week basis). On a daily closing basis, minor to perhaps decent resistance will be found between 1997 and 1003 and decent resistance at 2007. To the downside, there is no intra-week or daily close support until the 1949-1959 level is reached.

Monday could be a short-term indicative day if the SPX generates a red close. The index already closed on Friday 2 points below the previous all-time high daily close at 1987 seen on July 24th. If the bears can manage another red close on Monday, the probabilities will highly favor the index dropping down to the 1950-1959 level before any buying of consequence re-appears.

The charts of the SPX seem to suggest the index will continue to show weakness for the next couple of weeks with 1950 as the downside objective and then a rally back up to the 2000 level by the end of the month. A failure to make a new high at that time will bring in a new rash of selling and generate an objective of 1800 for November before some recovery is seen.

Lots of questions were asked this past week as the indexes showed unexpected weakness and a few minor but possibly indicative breaks of support. The correction seen in October/November 2012 seems to have a high probability of being repeated and that would mean that the high for the year was made this past week. By the same token, the monthly chart of that period of time does show all the indexes closing near the highs of September, suggesting that even though some follow through weakness could be seen this week and even the week after, that a rally back up to the recent high could be seen before the month expires on Tuesday September 30th.

Three are quite a few economic reports due out almost every day this week (Monday through Thursday) with Empire Manufacturing, Industrial Production and Capacity Utilization due out on Monday, PPI on Tuesday, CPI and FOMC rate decision on Wednesday, and Housing Starts, Building Permits and Philadelphia Fed due out on Thursday. Economic reports have not been catalytic as of late unless extremely good or extremely bad and extremely bad has been more beneficial to the market than extremely good, as it favor the Fed keeping the low interest rate scenario for a longer period of time. Neither of these options are likely to be seen this week, meaning that the chart outlook as mentioned above is likely to prevail.

Expectations are for further downside to be seen this week but not aggressively so. Nonetheless, if the downside does occur it will be indicative as it will increase the chances that the indexes are mimicking what happened in September-November 2012.