DOW Friday closing price - 17552

The DOW generated a positive reversal week, having made a new 10-week low and then closing in the green and on the highs of the week, suggesting further upside above last week's high at 17607 will be seen this week. Nonetheless, the reversal is not likely to have the same kind of meaning that it would normally have, given that the participation was low due to the shortened holiday week (lowest volume since the last 2 weeks of December of last year) and that there is a seasonal tendency for a Xmas rally (for the past 5 years the index has rallied Christmas week).

The DOW has been on a slightly bearish roller coaster ride for the past 7 weeks (ever since the rally that started in September reached its peak on November 3rd) as the index has made 3 lower highs and 3 lower lows during this period of time, suggesting that once the New Year begins the end result will be negative.

To the upside, and on an intra-week basis, the DOW shows no resistance until the previous spike high at 17796 is reached. Above that level, resistance is found at 17866, at 17914, and at 17977. On a daily closing basis though, there is minor to perhaps decent resistance between 17602 and 17635.

To the downside and on an intra-week basis, the DOW shows minor support between 17399 and 17425, minor at 17210 and minor to decent between 17116 and 17138. Below that level, there is decent support at 17037/17067, minor at the 17000 demilitarized zone and then nothing of consequence until the 16000 level is reached.

It should be stated that last year the DOW rallied Xmas week but began a mini short-term downtrend the following week (New Year's week) that took the index down from 18103 to 17037 (1066 points) over a period of just 5 weeks. With the market seeing the first interest rate hike in 8 years there is now a fundamental reason for the index to drop (more so than last year), suggesting that last week's rally was not indicative of lasting buying interest and that some selling will be seen this week.

The DOW is likely to generate a negative reversal or a fail-to-follow-through week this coming week, especially considering that the 50-week MA, currently at 17575, is a line that has trend importance and given that the bulls were unable to close above that line on Thursday, it probably means that without some new and positive fundamental reason that the bulls will fail again this coming week.

NASDAQ Friday closing price - 5048

The NASDAQ generated an inside week but did close on the highs of the week, suggesting further upside above last week's high at 5063 will be seen this week. By the same token, the index closed on the lows of the day on Thursday, suggesting that the first course of action for the week will be to the downside. With the index having generated a gap up on Wednesday between 5007 and 5020 it is possible that the magnetism of the gap will prevent the index from rallying and therefore preventing the index from going above last week's high.

The NASDAQ (just like the DOW) rallied last year on Xmas week and began a 3 week drop from 4814 to 4567 the week after, meaning that follow through to the upside is not a given to be seen this week. With no economic reports of consequence due out, the bulls will not have the additional ammunition needed with which to extend last week's rally, at least not from a fundamental basis.

To the upside and on an intra-week basis, the NASDAQ will show minor resistance at 5088, minor again at 5111, and decent to perhaps strong between 5163 to 5176. Strong resistance is found at the all-time high at 5231.

To the downside and on an intra-week basis, the NASDAQ shows minor support at 5025 and 5011and at 4976. Below that level, decent support is found between 4901 and 4908 and then again decent but pivotal as well as at 4871.

The key for this coming week in the NASDAQ is the 5088 level of resistance as a break above that level will likely generate a move up to 5119 and allow the index to close in the upper half of the month's trading range, opening the door for the index to start the year on a positive note. On the other side of the coin, if the bulls are unable to get above 5088 this week, the gap down at 5007 will beckon strongly and a close on Thursday below 5005 would cause the index to close in the lower half of the monthly trading range, opening the door for the index to start the year on a negative note.

Even with the lower participation/volume seen for Xmas week, the NASDAQ still generated a 135 point trading range last week, suggesting that there will be enough movement this week for one of those 2 levels mentioned above to be seen. Based on the action seen last year and on the fundamental picture presently in place with the hike in interest rates, the probabilities favor the bears.

SPX Friday closing price - 2060

The SPX generated a 62 point rally from the low of the week (2005) to the high of the week (2067) and closed near the high of the week, suggesting further upside above last week's high at 2067 will be seen this week. Nonetheless, neither the bulls nor the bears accomplished anything as the index had an inside week and basically traded between the 100-week MA, currently at 2003, and the 50-week MA, currently at 2062, suggesting that the action seen was not indicative of what is to come as no statement of consequence was made by either side.

The SPX, just like with the DOW, generated a green close on the high of the week Xmas week 2014 but failed to see follow through the following week and promptly proceeded to see a 112 point drop the following 6 weeks. The probabilities do favor the bears as exactly 1 year ago the index closed out Xmas week at 2069 and having closed this year's Xmas week at 2060 (9 points lower) strongly suggests that the bulls are not in control. With higher interest rates being seen now, it is highly unlikely that the bulls have enough ammunition to rally the index to close out the year higher than last year.

To the upside and on an intra-week basis, the SPX shows minor but short-term pivotal resistance at 2076. Minor resistance is also found at 2080 and at 2023 and decent at 2104. Decent and likely longer term pivotal resistance is found at 2116 and strong at the all-time double top at 2132/2134.

To the downside and on an intra-week basis, the SPX shows minor but short-term pivotal support at 2039, minor to perhaps decent at 2019 and decent between 1993 and 2005.

The key to the week in the SPX is the 2076 level as a break above that resistance will likely generate a rally back up to the 2100 level as well as a close above last year's close. Another key to look for on Monday is a green or red close as the index closed on Wednesday at the 200-day MA, currently at 2062, and having closed in the red on Thursday, a red close on Monday would confirm that the 200-day MA has been tested successfully. Such action would likely cause the bears to take control in a week where participation is likely to be low.

Last week was a bit of a head-scratcher, given that the previous week the indexes closed weakly after the Fed raised interest rates. By the same token, there were some reasons for the indexes to rally last week as the participation and volume were extremely low and it was Xmas week, which is a week that seasonally generates upward movement, meaning that the traders had an easier path to the upside than the downside. Nonetheless, this week is going to be more difficult for the bulls since a rally and green close this week would go against what happened last year and would tilt the results for the year to the bull side and not the bear side. With higher interest rates being seen for the first time in 8 years, it is highly unlikely that fundamentally the bulls will be able to accomplish such a feat. As such, the probabilities favor a red close week.

There are 2 economic reports this week (20-city Case/Schiller Index and Consumer Confidence), both due out on Tuesday. It is unlikely though that either report will have any kind of impact on the market.

Though the action last week suggests further upside will be seen this week, if there is no follow through to the upside seen on Monday, the indexes could give back all that they gained last week.