DOW Friday closing price - 16323

The DOW had an uneventful week closing only 20 points above last week's close, in the middle of the week's trading range, and having had a reduced trading range (275 points versus the previous week's 490 points), suggesting that the traders mostly took the week off as they await all the important economic reports due out this week (ISM on Tuesday and Jobs Report on Friday).

Nonetheless, the DOW is now showing an increased probability of a strong correction occurring since the index has now had 12 weeks without a new all-time high being made and has had 2 periods of 4 weeks each where the index trading traded up to a price and failed to break that price after repeated attempts. The first period was between the weeks of December 30th and January 20 where the index traded up to the all-time high at 16588, followed by 3 weeks in a row of highs at 15652, 16505, and 16520 and then followed by the second period that started the week of March 3rd in which the index traded up to 16505, followed by 3 weeks in a row of highs at 16460, 16456, and 16466. After the first 4 weeks the index then corrected 1148 points and it stands to reason to think that if a second correction is to occur, that the correction will be bigger than the first one.

On a weekly closing basis, there is decent resistance at 16452 and strong resistance at 16478. On a daily closing basis, there is minor resistance at 16336, minor to decent at 16367, decent at 16452 and strong at 16576. On a weekly closing basis, support is minor at 16065 and 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 very minor support at 16222, minor to perhaps decent at 16065, minor again at 16027 and at 16040, minor again at 15821 and minor to decent at 15739.

The DOW did generate a small failure signal this past week having made a new 11-day high on Wednesday and then making a new 5 day low the very next day on Thursday. The reversal type action, as well as 3 red daily closes this past week, does suggest that the bears seem to have the edge at this time and if the economic reports this week are not sufficiently good enough to undo the negatives seen the past 3 months, it will likely mean the indexes are about to start a second and stronger correction.

It should also be mentioned that on a monthly closing basis, if the DOW closes below 16321 on Monday (2 points lower than the close on Friday), last month's close will become the "first" successful retest of a previous monthly closing high (16576 in December) that has been seen since the index turned the downtrend around on March 2009. In addition, if the index goes below last month's low at 16046 anytime in April, the retest of the all-time intra-week high at 16588 will have also been accomplished. Given the fact that none of this has occurred even once in the past 5 years must be considered indicative and pivotal if it happens.

Though Friday was not a big indicative day in the DOW the index did set up the day to be indicative if Friday's low at 16267 is broken on Monday and a red close occurs. A break below 16267 and a red close on Monday will generate the 4th successful retest of the all-time high on all those charts, as well as make it difficult for the bulls to generate on Tuesday the kind of a rally needed to cancel all the negatives seen over the past 3 months even if the ISM index report is better than expected.

It is evident that the DOW is facing a very pivotal week with daily, weekly, and monthly charts at crucial points. Over the past few years it would have been expected that the bulls would win this round, as they have won most rounds in the past 5 years, but with 3 months of recent failures the confidence in further upside occurring has eroded to the point where it is possible to consider that we are now at a "real" turning point of importance.

If the turning point in the DOW does happen, it won't necessarily mean a major top has been built but it will likely mean that a strong correction of near 20% (as was seen in July-October 2011) could occur, meaning that the mid 13000's would be the objective to be reached by the end of June or July.

Support in the DOW is found at 16217 and more important at 16046 and resistance is found at 16466 and more important at 16505. A break of either of these levels would likely stimulate further movement in the direction broken, likely of consequence.

NASDAQ Friday closing price - 4155

The NASDAQ gave a failure signal on the weekly closing chart on Friday, having closed below the previous 13-year high weekly close at 4197 seen in January. In addition, the index confirmed on the daily closing chart the sell signal given on Monday when it closed below the previous low daily close of importance at 4245, as well as below the previous 13-year high daily close at 4243, and did it every day of this past week.

The NASDAQ is also having a reversal month, having made a new 14-year high this month and now highly likely to close in the red, near the lows of the month, and below last month's close at 4308, suggesting further downside will be seen in April below last month's low (currently 4131). The reversal is especially indicative since the index generated a positive reversal in February and follow through to the upside was seen on an intra-month basis but will not be seen on a closing basis, meaning the bulls have likely lost their long-term momentum.

On a weekly closing basis, minor resistance is found at 4276 and decent resistance is found at 4336. On a daily closing basis, decent resistance is found at 4243, minor resistance is found at 4318/4319, minor to perhaps decent resistance is found at 4333 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 to perhaps decent at 4113, minor at 4051 and decent at 3996/3998.

The NASDAQ closed near the lows of the week on Friday and further downside below last week's low at 4131 is likely to be seen. By the same token, Thursday's low was right on the 100-day MA, currently at 4135, and the index did generate a green daily close on Friday, meaning that Thursday's close is now considered a successful retest of the line, both intra-week and on a daily closing basis. Given that the line has not even been broken intra-week during the past 12+ months, a lower low below 4131 next week would be a negative sign.

The NASDAQ did generate a bounce on Friday with a rally up to 4203 intra-day. Nonetheless, the bulls failed to maintain the buying interest throughout the day and the index closed near the lows of the day, also suggesting that the first course of business for the week will be selling. It should also be mentioned that the index is likely to have a reversal month, having made a new 14-year high at 4371 but now highly likely to close in the red and on the lows of the month. The reversal is not as indicative as it might be in the DOW as the index has already shown 2 previous monthly reversals over the past 5 years, but never has a reversal to the downside come after a previous month's reversal to the upside, meaning that the bulls have lost most if not all of their momentum.

To the upside, the NASDAQ will now show decent resistance between 4223, which is where the 50-day MA is currently at, and up to 4246 which is where the previous 13-year intra-week high was seen in January. It is also where 2 previous lows of consequence, at 4239 and at 4241, are located. Simply stated, it likely will require some strong positive fundamental news to give the bulls the needed buying interest to break what is now considered an important and indicative resistance level.

To the downside, the NASDAQ has minor but likely short-term indicative support between 4097 and 4103 and then nothing until the 4000 demilitarized zone is reached. The index generated last month's positive reversal from a low of 3968 and if that level gets broken, the entire rally seen this year will be negated and selling pressure will increase strongly since there is no recently established support of any consequence below 3968 until 3650 is reached.

It should also be mentioned that most of the major stocks in the NASDAQ, such as PCLN, GOOG, NFLX, AAPL, AMZN, and BIDU have given strong signs that a top has been built and most of those stocks are nearing levels of support that if broken would generate a profit taking binge and likely new sellers. It does seem like a top has now been found and confirmed and the big question right now is how much farther the index will fall. It is evident that the 4100 level is now a target and likely to be reached, but 4000 has also now become a viable target as well and one that if broken would be highly significant.

The NASDAQ has a clear trading range between 4097 and 4246 that can be traded this week without a major decision being made, but any break above or below that trading range will "tip the scales" strongly in that direction and a break below 3968 or above 4371 would bring about a major move in that direction. Based on the recent action, the probabilities favor the downside.

SPX Friday closing price - 1857

The SPX generated a red weekly close on Friday that makes the previous week's close at 1866 into a successful retest of the all-time high weekly close at 1878. Nonetheless, no sell or failure signal has yet been given, meaning that the index is still in an "undecided" mode that is likely to be decided this coming week.

On a possible negative note, the SPX will have a negative reversal month if the stock closes in the red on Monday, given that last month's close was at 1859 and the index closed at 1857 on Friday. The index has had 2 previous reversal months in the last 5 years, with the first one being in May 2001 which in turn caused 22% correction to occur, and the second one was in April 2012 which in turn caused an 11% correction to occur. It is evident that negative monthly reversals have been good indicators in the SPX and if a monthly reversal occurs on Monday, the probabilities will increase that the index is heading lower.

On a weekly closing basis, there is minor resistance at 1866 and decent resistance at 1878. On a daily closing basis, there minor resistance at 1865 and at 1872 and decent at 1878. On a weekly closing basis, there is minor support at 1841, 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 at 1849, decent at 1841, and very minor between 1826 and 1828. Below that level, there is minor to decent support at 1819, minor support at 1805 and then decent support at 1775.

The SPX has recently been the index getting the most positive fundamental reports but for the last 4 weeks the index has not been able to renew the uptrend with intra-week highs at 1883, 1882, 1883 and 1875. The inability to get above 1883 suggests that the bulls have run out of ammunition and require additional fundamental help to go higher. By the same token, the bears have also been unsuccessful as the lows have been also supported with lows the past 5 weeks of 1836, 1834, 1839, 1842, and 1842. It should be mentioned though, that on the daily chart, the index is showing a formation that is lightly biased to the downside as a double top is now found at 1883 that includes a confirmed successful retest seen on Tuesday at 1875. A break below the low seen the past 5 weeks at 1834 would likely be a catalyst for a correction of consequence to occur.

Much could be decided in the SPX on Monday with a red daily close but then again the economic reports this week could give additional ammunition to the bulls if they come in better than expected.

To the downside, the SPX shows pivotal support at 1834 that also includes the 50-day MA, currently at that price. Further support is found at 1815 that also includes the 100-day MA. Nonetheless, the MA's are not all that important in this index as they have been broken to the downside this past year on 4 occasions, meaning the traders are not respecting those lines as they are respected in other indexes. By the same token, previous intra-week lows have been important and if the support at 1834 is broken, then 1815 will likely be seen, and if that support gets broken the index shows no support until 1767 and then at 1750 which is where the 200-day MA is currently at, and that has been a line that has generally been respected in the past.

The SPX closed in the middle of Friday's trading range and slightly in the lower half of the week's trading range, meaning that Monday the probabilities slightly favor the downside more than the upside, especially since there are no economic reports due out. A red close on Monday would mean that the ISM Index and/or the Jobs report would have to be bullish in order to give the bulls any hope of preventing a correction from starting.

The action this past week can certainly be considered more negative than positive and with Monday's monthly close being important from a chart perspective and the probabilities slightly favoring a negative reversal signal given on all charts, it can be said the bulls have "their work cut out for them".

The 2 most important economic reports for the month will be reported this week with the ISM Index on Tuesday and the Jobs report on Friday. Both reports are expected to be slightly better than last month (ISM index expected at 54.2% vs last month at 53.1% and the Non-farm Payrolls to be 185k vs last month at 175k). If the reports come out as expected it is not likely to be of much help for the bulls but if less than expected, selling will likely be seen. The probabilities of the reports coming out better than expected have to be low since already they are expected to be better. It should also be mentioned that the Chicago PMI comes out on Monday at 9:45 am and the traders may take a cue off of that as it is a manufacturing report that could give some inkling as to how the ISM index comes out on Tuesday. The Chicago PMI is expected to come out at 60.1 vs last month's 59.8.

It is evident that the bulls need some help as the indexes have given failure and sell signals as of late. Resuming the uptrend is now an uphill battle that requires fundamental assistance. As such, it can be said the probabilities favor a correction of consequence starting this week.