DOW Friday close at 9972

The DOW received nothing but exceptional news on the earnings front this past week with 85% of the companies reporting better than expected earnings and several companies reporting "blow out" quarters. Nonetheless, all that good news was not able to help generate a close above 10,000 or a green close at the end of the week. It is evident that the 10,000 level is going to be a tough nut to crack as the bulls will need more positives than they received this past week to accomplish getting the index to go higher.

It must be noted that volatility increased strongly this week. On Wednesday the DOW generated a "key reversal" day to the downside,, on Thursday the index had an up day that "almost" negated the reversal, and then on Friday a strong down day that came within a few points of being another reversal day to the downside. Such volatility generally means that a change of trend is about to occur. The two-way action, especially on a week where the action should have all gone one-way (up), means there is a lot of selling interest as well as increase in volume at this price. With the market generally trading 9-12 months in advance, it could be said the traders do not expect the good news to continue for next year.

On a weekly closing basis, there is now minor chart resistance, as well as major psychological 10,000 level resistance at 9996. On a daily closing basis, there is minor resistance at 10062 and at 10081 and strong resistance at 10092. On an intra-day basis, there is now a double top at 10118/10119. On a weekly closing basis, decent support is now found at the most recent close at 9488, minor support at 9441, and again at 9321. Below that there is nothing until the 50-week MA currently at 8555. On a daily closing basis, there is minor support at 9949, at 9871 and a bit stronger at 9665. Strong support is found at 9488.

It is important to mention that during the last 3 days of the week the DOW traded in almost identical daily ranges of at least 175 points, with "basically" the same highs and same lows. This same situation happened in May of this year when the index traded between 8410 and 8588 three days in a row. The end result of that 3-day event in May was a small correction that lasted 2 weeks. As such, it is highly likely that the indexes will be heading lower from here, for at least a couple of weeks, even if the index has not yet topped out.

Nonetheless, there are many signs that seem to point to a high of consequence having been made this past week, and from which a stronger correction will probably occur. To begin with, the extremely positive earnings news this week failed to generate any further upside (the index closed lower than last week's close). In addition, it must be mentioned that the DOW came within 1% of reaching its 100-week MA, the NASDAQ came within .7% of reaching the 200-week MA, and the SPX actually reached 100-week MA when it rallied up to 1101. The 100 and 200 week MA's are powerful lines that are not easily broken, especially from such an overbought condition as the indexes presently find themselves in.

This is a week that will likely continue to show volatility and indecision, as there are over 500 companies due to report earnings this week. In addition, the Durable Goods Report and GDP, two very important economic reports, will come out on Wednesday and Thursday, respectively. Nonetheless, as far as earnings reports are concerned, a large portion of high profile companies have already reported earnings and the ones reporting this week are not likely to have such an impact as the ones that reported last week. In addition, the economic reports, as important as they are, are both already anticipated to be much better than the previous reports, leaving the door open for disappointment if they do not attain those high numbers, or for no positive impact if they come in as anticipated.

The probabilities of a correction occurring from here strongly increased this past week when the market literally refused to generate further upside of consequence even though the news was positive, the trend up, and the momentum still in favor of the bulls. The burden of proof has now shifted to the bulls and even if the bears are silent, the market could begin to drop on simple profit taking by the bulls from having reached these high price levels.

The 100-week MA will be down around 10150 this coming week so even if the news this week continues to be bullish, it is possible that a new 12-month high would not generate further upside of consequence. Intra-day resistance will be strong at the double top at 10118/10119. The week's low at 9917 will be considered support but if broken, there is no intra-week support of consequence on the weekly chart until 9500/9550 level is reached. The 50-day MA, which held the index up on the last drop down 3 weeks ago, is currently at 9670. With the most important report (GDP) not due out until Thursday, the possibilities of a drop in the DOW to the mid to low 9600's on Monday and/or Tuesday are good.

NASDAQ Friday Close at 2154

The NASDAQ got above the January 2003 intra-day high at 2186 (high this week was 2191) but not up to the Aug 2005 intra-day high at 2220 or up to the 200-week MA currently up at 2212. Nonetheless, it can be said the index itself was the weakest of all the indexes this week as it closed -.02% below the previous week's close even though the index was the recipient of the 2 strongest earnings reports and rallies this week.

Having had the 2 stocks in its index that rallied the most this week (AAPL up 20% and AMZN up 28%), it has to be a major surprise and disappointment that the index closed out the week in the red. Such an event seems to indicate that, on a weekly closing basis, the chart resistances from the bull market in 2003-2005 between 2140 and 2185 are going to be close to impossible to break.

On a weekly closing basis, resistance is very strong at 2175/2185. Nonetheless, on an intra-week basis, resistance is very strong up at the 2005 high at 2220 as well as at the 200-week MA currently at 2212. On a daily closing basis, resistance is now decent between 2173 and 2176 as that now shows as a possible double top on the daily closing chart. Additional minor resistance is now found at 2165. On a weekly closing basis, support is strong at 2048 and minor at 2019 and again at 1986. Below that, there is no support until minor support is found at 1859 and strong at 1756. On a daily closing basis, support is minor at 2151 and again at 2139. Below that level support is decent at the 50-day MA currently at 2091, and decent to strong at 2048 from the most recent daily close of consequence. Below 2048 there is no support until the 100-day MA, as well as previous low close, at 1969 is reached.

The probabilities of AAPL and AMZN continuing much higher than where they are right now has to be limited as both stocks find themselves in new all-time highs but in a market that generally does not support all-time highs fundamentally. As such, it is probable that without the continuing help of its strongest stocks, the NASDAQ will get into a correction phase.

It also has to be mentioned once again that during the last bull market, in the period between 2003 and 2005, the index was unable to get above the 2220 level for a period of 3 years (on a weekly closing basis 2185). Having gotten up to 2191 this past week and having generated a weekly close at 2157, it seems highly unlikely that further upside of consequence will be seen. It must also be mentioned that with the help of the two stocks mentioned above, the index got up to 2191 on 2 different days, thus creating what could be a double top on the intra-day chart.

A break below the most recent low at 2131 will likely cause the NASDAQ to go target 2 gaps that have been left open between 2075 and 2079 as well 2019 and 2023. Keeping in mind that the 100-day MA is currently at 1976, that could mean that if the economic reports this week disappoint that both gaps will be filled with a drop down to the 100-day MA. Resistance, on a daily closing basis, is at 2173/2176 as well as the intra-day double top at 2191.

S&Poors 500 Friday close at 1080

The SPX rallied this past week to the 100-week MA at 1101, only to see it fall back and close out the week below last week's close at 1088, in spite of strong positive earnings reports in the financial industry. The SPX is considered by most large traders to be the leading index in the market and it can be said that a major upside chart objective was reached when the index got up to the MA line.

In addition, the SPX also shows that two major Fibonacci numbers (50%, 61.8%) were reached this past week when the stock got up to the 1101 high. The 50% number refers to a "retracement" of the original move down from 1565 to 666 and the 61.8% refers to the rally percentage from the low at 666 to the high of 1101. What Does Fibonacci Retracement Mean? It is a term used in technical analysis that refers to the likelihood that price will retrace a large portion of an original move and find support or resistance at the key Fibonacci levels before it continues in the original direction.

On a weekly closing basis, there is now minor resistance at last week's close at 1088. On a daily closing basis, there is now decent to strong resistance at 1097/1098 as a double top was built at that price this past week. There is also minor resistance at Thursdays close at 1093. On a weekly closing basis, support is decent to strong at 1025, minor at 1016 and again at 1004. Strong support is found down at 879/882. Below that level there is minor support at 825 and very strong support at 800. On a daily closing basis, there is minor support at 1073 and again at 1044. Decent to strong support is found down at 1025. Below that, there is decent support at 994 and strong at 979.

This coming week is the monthly close and the monthly chart of the SPX does show a couple of interesting points that need to be mentioned. To being with, 5 previous monthly closing lows are found between 1091 and 1112, going all the way back to 1998. Though previous lows closes are never considered as strong a resistance as previous high closes, the fact that there are a total of 5 seems to suggest an area that is likely to put some break on the rally. With the high this month at 1101, it can be said that this particular resistance level has been reached. It must also be mentioned that if the index closes above 1057 on Friday, it will make a new record of continuous months (8) without any kind of monthly correction. The last time the index had such a run was back in 1994 when the index went up 7 months before a correction, though minor, occurred.

There are many chart signs that seem to be stating that at least a strong correction will occur from here on in. With the SPX being the leading technical indicator in the market, the 100-week MA, the string of 5 monthly closing lows during the past 11 years, and the Fibonacci numbers all seem to point to at least a temporary high having been made.

I believe the first key to this week is 1067 as that was the previous week's intra-week low. If that level is taken out early in the week it will put the index under selling pressure as there is little in the way of support on the weekly chart until the 1025/1035 level is reached. On a daily closing basis, though, the support is decent at 1044 and that would be the first objective should the index break below 1067. It must also be mentioned that the SPX shows 2 open gaps between 1075/1079 and between 1016/1019. This is an index that never leaves open gaps and if the index has reached a top, these 2 gaps will become magnets for the traders.

Nonetheless, as with the other indexes, there are still some fundamental events occurring this week that could become a monkey wrench to the indexes.

Even though there are still a slew of important earnings and economic reports due out this week, the trading seems to suggest that the traders are now looking past the good earnings and to what the next 6 months to a year will bring. Having closed out the week in the red, in spite of very strong earnings reports, is a negative that will start working on trader's minds. Under that kind of a scenario, traders will likely assume that a correction of consequence is about to occur and start taking profits.

It must also be mentioned that all the indexes have reached chart levels where previous resistances of consequence are found. In addition, the indexes find themselves in an extreme overbought condition after a rally that has lasted 8 months and from which at least a 50% retracement of the previous move down has occurred.

With all the earnings and economic reports due out this coming week, as well as all the technical chart points having been reached, it is highly probable that some mid-term decision will be made by the end of this week.