DOW Friday closing price - 17552

The DOW generated a negative reversal week, having gone above the previous week's high and then closing in the red and on the lows of the week, suggesting further downside below last week's low at 17421 will be seen this week. With the red weekly close coming on the last week of the year, the index has mimicked what happened the last 2 years with the green weekly close on Xmas week and red weekly close on the last week of the year. Last year, the index dropped from 18073 to 17037 (1036 points = 5.8%) and the year before that from 16588 to 15340 (1248 points = 7.6%), all between the high seen the last week of the year to the low seen the first week of February.

The DOW finds itself in a much more negative position that it was in the previous 2 years, given that both in 2014 and 2015 the index had just finished making a new all-time high either Xmas week or the last week of the year and in neither occasion was it facing an interest rate hike to start the year as it is facing now. On this occasion, the previous all-time high was made in May and repeated successful retests of that high have already been made, suggesting that if the same type of downtrend starts at the beginning of the year, it could be deeper and stronger than the ones seen the past 2 years as it could signal not just a short-term downtrend but perhaps even the beginning of a longer term one.

To the upside, and on an intra-week basis, the DOW shows resistance at last week's high at 17750, then at 17796, at 17866, at 17895, at 17914 and at 17977. Above that area, further resistance is found at 18137, at 18188, at 18288 and at the all-time high at 18321,

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.

Since the all-time high was made in May of last year, the DOW has generated a total of 7 rally highs, all of which have failed to get above the previous rally high. Over the past 2 months (since November), the index has not only failed to rally above a previous high 5 times but has also made lower lows on each spike low seen (2 occasions), suggesting that the index is in a clearly defined short-term downtrend that is likely to become a stronger one due to the repeated failures, higher interest rates, and history seen the past 2 years.

The 50-week and 100-day MA's, currently at 17225 and at 17150 respectively, are lines the traders will be keeping a close eye on this coming week, given that on a closing basis those lines have been decent support since October. A break of those lines, especially if last year's February low at 17037 is broken intra-week as well, would suggest that the September low at 15942, or even the August low at 15340 will be retested.

The DOW is likely to start the year on a negative note but this coming week could be pivotal, given that the 2 most important economic reports for the month are due out, with the ISM Index coming out on Monday and the Jobs report of Friday. With the index having generated 600+ point trading ranges most every week during the past 2 months, the levels to watch this week will be 17750 (last week's high) and 17124 (the low of the last 3 months, seen 3 weeks ago). A break above or below those levels is likely to be clearly indicative, at least for the next 5-8 weeks. Probabilities favor the bears.

NASDAQ Friday closing price - 5007

The NASDAQ generated a negative reversal week, having gone above the previous week's high but then closing in the red and on the lows of the week, suggesting further downside below last week's low at 4999 will be seen this week. The index also gave a failure to follow signal on the monthly chart, given that it closed below the previous all-time high monthly close at 5105 (seen in July of last year) after 2 months in a row of having closed above that level (October and November) when it closed at 5142. The failure signal does suggest that the bulls will need a positive fundamental change in January to prevent confirmation of the failure and further downside. A positive fundamental change in January is highly unlikely to be seen.

The NASDAQ was unable to generate enough buying this past week to resume the uptrend in spite of the new all-time highs made in AMZN and GOOG and with AAPL giving a sell signal and NFLX failing to negate the failure signal given 3 weeks ago, it does seem that the index is about to succumb to selling pressure over buying interest.

To the upside and on an intra-week basis, the NASDAQ will show very minor resistance at 5088, minor but likely pivotal at last week's high at 5116, and decent to perhaps strong between 5163 and 5176. Strong resistance is found at the all-time high at 5231.

To the downside and on an intra-week basis, the NASDAQ shows very minor support at 4999 and minor at 4974. Below that level, minor support is found at 4921, and decent support is found between 4901 and 4908 and then again decent but pivotal as well as at 4871.

The NASDAQ has gapped up or down a total of 6 times over the past 14 trading days and is presently showing an island gap, having gapped up on Monday between 5041 and 5065 and gapped down on Thursday between 5065 and 5058. Nonetheless, island formation are very rare and up until now all recent gaps have been magnets and closed sooner or later, meaning this island gap is likely to be closed as well. By the same token, with the start of the year likely to be negative, if the bears can garner some momentum to the downside and break the low seen 3 weeks ago at 4871 and do it without the island gap getting closed, the formation would take on added and ominous meaning as an unclosed island formation to the downside usually signals a major top.

The NASDAQ has been trading mostly sideways between 4900 and 5160 for most of the past 9 months with the exception of July when the index made the new all-time high at 5231 and from August to October when the index corrected down to 4293. During those 9 months, the index shows a total of 8 weekly closes between 4894 and 4939 (6 lows and 2 highs) that clearly delineates the support level of importance that if broken would mean that something new and of importance is happening. With the index closing on the lows of the week and further downside likely to be seen this week, the probabilities favor the index once again heading down to that area, suggesting that a major decision might be made this week, especially considering the important ISM Index and Jobs report, the rise in interest rates and the probability that the sideways trend will end at the beginning of the year.

Last week's high at 5116 (and up to 5119) is now considered likely pivotal resistance and the low seen 3 weeks ago at 4871 is now considered pivotal support. With the index closing just about in the middle of that trading range and generating 100+ trading ranges on 4 of the last 8 weeks, the probabilities favor one or the other breaking this week. Probabilities favor the bears.

SPX Friday closing price - 2043

The SPX, like the other indexes, generated a negative reversal week, having gone above the previous week's high and then closing on the lows of the week, suggesting further downside below last week's low at 2043 will be seen this week.

The SPX has been trading on a weekly closing basis between the 50-week MA, currently at 2064 and the 100-week MA, currently at 2005, for the past 4 weeks but the probabilities strongly favor that sideways trend breaking and the index either resuming the uptrend or starting a new downtrend this coming week.

To the upside and on an intra-week basis, the SPX shows very minor resistance at 2076 and minor but short-term pivotal at last week's high at 2081. Above that level, very minor resistance is found at 2093 and then 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 likely to be the 50 and 100-week MA's as the probabilities favor one or the other breaking. A break above 2081 and a close next Friday above 2063 would likely mean the all-time high at 2135 will be tested. An intra-week break below 1993, in conjunction with a close next Friday below 2005, would give the bears the edge and likely cause the index to head down to test the August intra-week lows at 1860. Probabilities favor the bears.

The New Year is upon us and this year is likely to bring changes to the market, especially given that the Fed has now raised interest rates for the first time in 8 years, meaning that the "sugar coating" of the economy is over and normal trading off of economic reports (and not what the Fed may or may not do) is now likely to occur. The market traded mostly sideways for 2015 but 2016 is likely to be different because the economy is now likely to be the main focus.

The year starts with the ISM Index report on Monday and the Jobs report on Friday but given that the interest rate hike was only a couple of weeks ago, it is unlikely that traders will pay much attention to these reports this month and key mostly on the technical aspects of the market, at least until the following month when the reports will better attest the benefits or pitfalls of the interest rate hike. The technical aspects of the market right now are leaning to the downside and with the indexes having dropped down the first 6 weeks of 2014 and 2015, the probabilities favor the same thing happening in 2016.