DOW Friday closing price - 17477

The DOW generated another positive reversal week (the 4th in the last 3 months) having made a new 27-week low and then closing in the green. The reversal came when the index approached the double low at 17067/17037 that was made in Dec/Feb with a drop down to 17125, suggesting the traders are still reacting to the technical picture and have not yet made the decision as to whether the index is in a major correction or not. Nonetheless, on a weekly closing basis the short-term trend remains down as the bulls did not accomplish breaking any resistance levels above.

The DOW closed in the upper half of the week's trading range and further upside above last week's high at 17629 is likely to be seen. Nonetheless, if the reversal mimics the one seen 4 weeks ago, in which the 17700 resistance level held up, it would mean no further upside will be seen.

On a continuing negative note, the DOW has now spent the last 4 weeks trading below the 200-day MA, currently at 17825, which is something that had not happened since November 2012, and did close for the second week in a row below the 50-week MA, currently at 17680, which is a line that had only been broken once since November 2011 and even then it was only broken for 1 week, reinforcing the idea that the index is in a strong corrective phase, much like the one seen in 2011 when the index corrected 20% in value.

To the upside and on an intra-week basis, minor but possibly indicative resistance is found at 17629. Above that level, resistance is decent between 17683 and 17825, which does include the 200-day MA, currently at 17825. On a daily closing basis though, the 17615/17635 level is pivotal resistance, inasmuch as the index has been on a clear downtrend since May, with each high daily close (5 of them) being lower than the previous one and 17615 being the last high daily close. In addition, the 17635 was a low daily close of some importance that when broken for more than 2 days in a row generated the recent weakness, having traded below that level now for the past 2 weeks.

To the downside and on an intra-week basis, support is minor but possibly short-term pivotal between 17243 and 17279. Below that level, support is found at last week's low at 17125 and stronger at the double low between 17067 and 17037. A break of last week's low though, would likely create a triple low at the lower support level, suggesting it would get broken at some point. Further support would be found at the bottom of the 17000 demilitarized zone (at 16970), which does include the 100-week MA that has not been broken since August 2011.

The DOW bulls are likely to attempt to rally the index at the beginning of the week and get above last week's high, and more importantly close above the 17615 level. Nonetheless, the index chart is now decidedly bearish for the short-term and strongly suggestive of further downside to be seen.

NASDAQ Friday closing price - 5048

The NASDAQ and the tech sector continue to hold up the market, given that AMZN, NFLX, and GOOG remain strong to the upside, thus preventing the sell signals in the DOW from being confirmed. Nonetheless, in spite of the strength in those stocks, the index made a new 6-week intra-week low last week by dropping below 5000 for the first time in the last 25 trading days (got down to 4945) and now shows a short-term downtrend in which the last 3 intra-week highs since the all-time high at 5231 was made on July 20th, have fallen short of breaking a previous intra-week high, suggesting the bulls are starting to "lose the battle".

The NASDAQ closed slightly in the upper half of the week's trading range and further upside above last week's high at 5112 is expected to be seen. Nonetheless, the close was only 10 points above the mid-point of the week's trading range and still 64 points from last week's high, meaning that any rally above last week's high would need some fundamental help, which is not likely to be seen this week, especially since the 5000 level will be a magnet all week.

To the upside and on intra-week basis, the NASDAQ shows minor resistance at 5071 and then nothing until decent resistance is found at the 5112/5119 level. On an intra-day basis though, the index shows decent resistance at 5089, in the way of the 200 60-minute MA, currently at that price. Above those levels, further resistance is found between 5155 and 5175, that if broken would likely bring about a rally to the all-time high at 5231.

To the downside and on an intra-week basis, minor support is found 5006 and then nothing until 4974. Below that level, decent support is found at last week's low at 4945 and then decent to strong at 4901, which does include the 200-day MA, currently at 4908.

It should be mentioned that the NASDAQ gave a small sell signal on the daily chart this past week when it closed below 5036 on Tuesday. The bulls were unable to confirm the sell signal, having closed at 5044, at 5033, and at 5048 the following 3 days. By the same token, the bulls were not able to convincingly negate the sell signal either, meaning that as of right now the bears seem to have a slight edge.

Having pierced the 5000 level intra-week convincingly this past week, the NASDAQ is now showing fragility in the uptrend, given that the 5000 level is an important psychological support. It should also be mentioned that the index was helped when GOOG announced a restructuring and management shuffle that boosted the price of the stock. Nonetheless, none of the big tech stocks (including GOOG) made new highs and all look "toppy", suggesting that the index bulls may have a hard time stimulating any further upside this week.

If the bulls are unable to rally the NASDAQ early in the week, especially above the minor resistance at 5071, and once again the index falls below the 5000 level, it will be disappointing and prone to produce further selling interest. Any daily close below 5000 would a strong negative and any weekly close below 5000 would generate the sell signal the bears need. Probabilities slightly favor the bears.

SPX Friday closing price - 2091

The SPX had a mostly uneventful week, having made a new 6-week low at 2052 but not breaking the 6-month low intra-week support at 2039/2044. The index did generate a positive reversal though, when it closed in the green and near the highs of the week, suggesting further upside above last week's high at 2105 will be seen this week. In addition, the bulls were able once again prevent the 200-day MA, currently at 2077, from breaking on a daily closing basis, even though on Wednesday the index got down as low as 2052 before buying came in to help close the index above the line.

On a negative note though, the SPX continues to show weakness, inasmuch as each previous intra-week high (3 of them) since the double top at 2134/2132 was built on July 20th has been lower than the previous one, suggesting the bears have a slight short-term downtrend going for them at this time. In addition, the last positive reversal seen 4 weeks ago failed to generate follow through the following week, likely meaning that the bulls will need fundamental help this week to change that recent trend.

To the upside, the SPX shows very minor intra-week resistance at 2093, which does include the 50 and 100 day MA's, currently at 2094 and at 2097 respectively. Further resistance and likely short-term pivotal is found at 2105. Above 2105, decent resistance is found at 2114.

To the downside, the SPX shows minor support at 2063, a bit stronger at last week's low at 2052 and then decent as well as highly pivotal between 2039 and 2044. Below that level, there is no support until the 1970-2000 level is reached.

The 200-day MA, currently at 2077, remains short-term pivotal since the line has only been broken once (and only for 1 day) since October of last year. A confirmed close below the line (2 days in a row) would be a signal that further selling and downside will be seen. A weekly close below the 50-week MA, currently at 2060, would also be a strong sign of further downside, especially if confirmed, since that line has not been broken since December 2011, though it has been seen on 5 occasions.

It is evident that the SPX is now the pivotal index as it seems to be the "judge arbiter" of the market at this time. For the past 6 months, the index, on a weekly closing basis, has traded sideways between 2053 and 2126, and any weekly close above or below those parameters would likely stimulate strong follow through immediately thereafter. The index got down to 2052 this past week and even though a bounce occurred, it still suggests the bears have the edge. The bulls need a fundamental positive and with the first interest rate rise looming for some time this year, it is not likely they will get it, at least not until after the interest rise occurs.

The probabilities favor the bears.

The market continues to give mixed signals, with the DOW in a sell mode and the other indexes in a hold mode. Nonetheless, the probabilities favor the bears as the threat of an interest rate hike sometime this year will continue to hang over the market and not likely to go away until it happens. In fact, good economic news is now bad news as it increases the chances of the interest rate hike, meaning that the bulls have a tough road ahead until the rate hike occurs. In addition, the bulls face the threat of the Chinese market heading much lower, which in turn would add ammunition to the bear case. The probabilities of a strong rally in the Chinese market are slim at this time.

Once again, the monthly FOMC meeting minutes are due to come out this week on Wednesday and until that information is released the bulls are likely to survive, meaning that for the first 2.5 days of the week, more of the same as seen recently will occur. No other economic reports of consequence are due out this week. It is unlikely the Fed will do or say anything on Wednesday that would make a difference to the market.

I have to believe that the market will be under sell pressure until the interest rate hike occurs but would probably rally soon thereafter, meaning that keeping the interest rate hike on hold is probably a short-term negative.