DOW Friday closing price - 16452

The DOW failed to follow through on the previous week's positive reversal ending up with a red close week, below the previous week's low and on the lows of the week. The failure was particularly negative inasmuch as it means the index has now generated on the weekly chart a successful retest of the all-time high weekly close at 16478 using the previous week's close at 16452. The failure signal was also particularly harmful since it likely means the market rally has run full circle with Blue Chip Stocks now taking a back seat.

The DOW closed on the lows of the week and further downside is expected to be seen this week. With no close-by support found on the weekly chart until 15703 is reached, it is very likely that the index has now built a strong top that is going to require positive fundamental changes of consequence to turn around. Such fundamental changes do not seem to be a high probability at this time.

On a weekly closing basis, there is decent resistance at 16451 and strong resistance at 16478. On a daily closing basis, there is minor resistance at 16321, decent at 16452 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 16027 and at 16040, minor again at 15821 and minor to decent at 15739.

The DOW bears were successful in breaking 2 daily close support levels at 16257 and at 16168 that indicate that the selling interest last week was real and with strength attached. The break of the 16257 level was particularly meaningful as that level was the previous support that got broken in January and that caused the index to fall all the way down to 15340. Breakage of that level a second time could mean that the index is ready for a stronger correction than was seen the first time around.

To the downside, the DOW has very minor support at the 16000 demilitarized zone (15970-16030), which does include the 100-day MA, currently at 16030. Nonetheless, the 100-day MA has not been a supportive line in the past, meaning that the support in this area is likely to get broken. The next line of defense for the bulls is down at 15703 and if that level is reached it will mean that the index will be down 800 points from the high, meaning that that the entire rally seen the past 5 weeks will have meant nothing. Decent support is found at the 200-day MA, currently at 15630, and decent to strong support will be found at the year's low at 15340.

To the upside, the DOW will find resistance at the same 2 levels that got broken to the downside this past week at 16168 and at 16257. Resistance at those levels will be mostly on a daily closing basis, but the first one at 16168 does include a previous intra-week high from November of last year at 16174, as well as from the 50-day MA, currently at 16155. A close above both of these levels (16168 and 16257) will negate the weakness seen this past week.

The probabilities favor the DOW heading down to the 15703 level this coming week. The pivotal level is the 16000 demilitarized zone but the support there is minimal and likely to get broken unless the Russia/Ukraine problem is fixed (unlikely) and China is able to generate a turnaround to their economic malaise (unlikely for the short-term as well). A break below the 16000 demilitarized zone will bring in a lot of renewed selling interest and with no chart support of consequence until 15703 is reached the bulls will find themselves in a hole difficult to get out of without strong positive fundamental news, none of which is likely to be seen.

If follow through below 15970 is seen this week, the probabilities will increase that the 200-day MA, currently at 15620, will be seen and that would be the third retest of the line in the past 5 months. Such recurring retests of an important line, especially since the last one that did not generate a new all-time high, would likely mean that the line could be broken decisively this time around and that would be a strong signal that a major correction is forthcoming.

The weakness seen this past week, as well as the successful retest of the high on the weekly chart, is very indicative of a major top in the DOW having been made. Confirmation by the other indexes needs to occur before the traders take the short side aggressively but the probabilities now favor that confirmation occurring unless the fundamental picture changes this week.

NASDAQ Friday closing price - 4245

The NASDAQ was unable to follow through on the previous week's positive reversal, having failed to get above the previous week's high at 4371 and then generating the first red weekly close in the last 6 weeks. The index did close on the lows of the week and further downside is expected to be seen. Nonetheless, no failure signal has been given yet as the index was able to close on Friday above the previous high daily close at 4243, meaning that last week's drop might just be a pause in the uptrend and not necessarily the beginning of a correction.

By the same token, the NASDAQ is now at a pivotal point in the recent uptrend and if follow through to the downside is seen on Monday below 4239 and the index closes below 4243, the traders are likely to turn around and become sellers.

On a weekly closing basis, minor to perhaps now decent resistance is found at 4336. Above that level, 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, minor resistance is found at 4318/4323 and decent resistance is found at 4357. 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 4237/4243, minor to perhaps decent at 4113, minor at 4051 and decent at 3996/3998.

The NASDAQ has been the leader to the upside and with no resistance above for another 600 points, the negative action seen since the recent 14-year high at 4371 is likely indicative. The index has closed in the red on 6 out of the 7 last trading days and shows 2 successful retests of the high, both of which were negative reversal days, meaning that selling occurred even on days where some buying interest was seen. Nonetheless, up until now no previous levels of intra-week support have been broken, suggesting that the weakness might be only profit taking and not outright shorting.

To the upside, the NASDAQ shows minor intra-week resistance at 4339, at 4354, and then decent at 4371. To the downside, the NASDAQ shows indicative support at 4239, minor support at 4226 and again at 4170. Below that level, there is no support until minor to perhaps decent support is found at 4097. Strong support is found at the double low at 3979/3968.

It was clearly evident at the end of the week that the 4239 level is strongly pivotal with lows on Thursday at 4242 and on Friday at 4241. The support level held up well in spite of the fact that mostly selling was seen during those 2 days. By the same token, the economic news in the U.S. and worldwide has not been supportive of a rally and the probabilities of that changing anytime soon are very low, meaning that it is likely the support level will break this week unless there is some agreement between Russia and the Ukraine (unlikely) and/or the China market generates an unexpected rally on Sunday night.

The probabilities favor the NASDAQ having found a temporary top as the index has now been showing quite a bit of volatility during the last 3 weeks at a level where no previous resistance is found. As I mentioned several times during the last couple of newsletters, the traders are now looking more at what the index fails to accomplish than what it accomplishes and so far more of the former than the latter has been seen. So far no failure signal has been given but the probabilities do favor that failure signal being given this week.

It had been expected a few weeks ago that the NASDAQ would generate a fast correction down to the 3700 level, having seen that correction occur in January 2000 from 4303. The index did break above 4303 having seen a high of 4371, meaning that the probabilities of a drop down to 3700 have diminished but not gone away.

If the 4226/4239 level of support is broken, it will be expected that the NASDAQ will drop down to at least 4097. It should be mentioned that the 100-day MA, currently at 4105, has not been broken for the past 15 months, meaning that 4097 is a viable objective but that some kind of bounce will occur at that level. By the same token, a close below the 100-day MA will likely generate a drop down to the 200-day MA, currently at 3860. In addition, the 50-week MA, currently at 3780, has not been tested for the same 15 months and a break of the double low at 3969/3978 level would make that line a target.

The probabilities favor the NASDAQ breaking 4239 this week and a domino-like reaction to be seen with 4097 as the immediate objectives and the 3800 area as a possible objective to be seen over the next few weeks if the dominoes keep on falling.

SPX Friday closing price - 1841

The SPX failed to follow through to the upside after the previous week's positive reversal, suggesting that the previous week's close at 1878 might end up being a top to this rally, especially since it fits in with the idea mentioned in the newsletter 2 weeks ago that 1876 could be the high for this uptrend, based on what happened in 2007.

The SPX closed on the lows of the week and below the previous all-time high daily close at 1848, as well as minimally below the previous all-time high weekly close at 1842, suggesting that a failure signal might have been given. Nonetheless, it is evident that for a failure signal to have been given on the weekly chart, the index must generate another red close next Friday as a green close would suggest that a successful retest of that level has occurred.

On a weekly closing basis, there is minor resistance at 1878. On a daily closing basis, there minor to perhaps decent resistance at 1848, minor at 1859, and decent at 1878. On a weekly closing basis, there is very minor support at 1831/1836 and then nothing until decent support between 1775 and 1782 is reached. On a daily closing basis, support is minor between 1826 and 1828 and minor to decent at 1819. Below that level, there is minor support at 1805 and then decent support at 1775.

The SPX has not yet given a sell signal on the intra-week chart as a break below 1834 would need to occur for that to happen. Nonetheless, having closed on the lows of the week, it is highly likely the index will test the 1834 level this week. Though a break below 1834 would likely be indicative, it should be mentioned that the index has 3 further intra-week support areas of some consequence at 1824, at 1815, and at 1809 and all of those will need to be broken for the bears to gain a definitive edge. A break below 1809 though, would open the door wide open for another test of the 200-day MA, currently at 1738, which is also where the strong intra-week support was built the first week of February when the index fell down to 1737.

It is evident that the SPX is facing a pivotal week ahead but it should also be mentioned that the probabilities are now favoring the bears since fundamentally there are very few reasons to be a buyer when considering all the fundamental problems facing world markets at this time, unlikely to be solved on a short-term basis.

It should be mentioned that the SPX had an inside week this past week with a high of 1882 and a low of 1839, which was below the previous week's high at 1883 and above the previous week's low at 1834. A break of either the high or the low this week will likely determine what the index will do thereafter, at least for the next few weeks. A drop below 1834 will likely take the index down to at least 1772, while a break above 1883 will likely take the index up to at least 1900 if not up to the 2000 level. The probabilities favor the bears.

The indexes failed to follow through to the upside this past week and that means the unexpected is starting to occur. Unexpected moves in conjunction with volatility that was seen as well, does suggest strongly that a top of consequence might have been found. With the fundamental picture eroding strongly in China and the Russia/Ukraine situation not getting resolved and probably escalating, the outlook for the world markets is turning negative. In addition, the economic picture in the U.S. has not improved sufficiently to suggest that the negatives seen can be ignored.

Technically, the indexes had a negative week and one index (the DOW) did generate a failure signal and the other 2 indexes only need a small nudge to the downside this week to do the same. With few economic reports of consequence due out this week (Industrial Production, Capacity Utilization, Housing Starts and Permits, CPI, and Philadelphia Fed) and most of those reports already expected to come in lower than last month, the fundamental picture for this week is not positive for the bulls. With both Fundamentals and Technicals seemingly aligned at the same time, it will be very difficult for the bulls to prevent the indexes from giving the kind of sell signal that will cause the market to generate at least another strong correction, if not signal that a top to this uptrend has been found.

By the same token, the outlook just 1 week ago was strongly positive and the market turning around "on a dime" without a definitive negative piece of new is not usual, meaning that this coming week is pivotal with the bulls trying to negate the negatives seen this past week and the bears trying to make things happen. If recent past history is any indication of what will happen, the bulls are likely to win since they have been winning almost every battle for the past 4 years. Nonetheless, it does seem that something will be decided this coming week.