DOW Friday closing price - 18123

The DOW generated a positive reversal week, having made a new 10-week low and then closing in the green. Nonetheless, the bulls were not able to make it a believable reversal given that the index confirmed the previous week's failure signal with a second close in a row below the previous all-time high weekly close at 18272, as well as closed in the lower half of the week's trading range, suggesting a slightly better than 50-50 chance that the index will go below last week's low at 17992 than above last week's high at 18358.

The DOW will be looking at a fundamental (rather than technical) picture this week as the BOJ (Bank of Japan) will be announcing on Tuesday night whether they will add further Stimulus and the Fed will be announcing their rate decision on Wednesday afternoon. It is based on those announcements that the traders are likely to decide what to do with the index the rest of the week. Evidently, further Stimulus from the BOJ and no rate Decision by the Fed (which are the expected outlooks) would give the bulls some ammunition for rallying the markets. By the same token even those results do not guarantee that a rally will occur since the seasonal September-October swoon will be in play as well.

To the upside and on an intra-week basis, the DOW will now show minor resistance at 18250 and minor at 18358. Nonetheless, on daily closing basis, minor to decent but pivotal resistance will be found at 18313.

To the downside and on an intra-week basis, the DOW will show minor to perhaps decent support at the 18000 demilitarized zone, very minor at 17855 and minor but also short-term pivotal at 17713. Below that level, there is no support until minor to decent support is found between 17331 and 17476.

It is likely that the DOW has begun the seasonal September to October swoon that was clearly evident the last 4 years. In 2012, the index fell 8.8% between the first week of October and the second week of November, in 2013 the index fell 6.4% between the 3rd week of September and the 2nd week of October, in 2014 the index fell 8.7% between the 3rd week of September and the 2nd week of October and last year (2015) the index fell 6% between the 2nd week of September and the last week of September. Keeping those corrections in mind, the potential downside objectives would be 17547 (6.0%) or 17025 (8.8%). By the same token, last year the index had already fallen 16.3% in the previous months, suggesting this correction will be more than that.

It is clearly evident that the Fed and BOJ decisions this week could be impactful to the DOW but it does seem that the odds may already be stacked against the bulls, given the "expected" outcomes of those decisions and the volatility and weakness seen this past 6 trading days in spite of the lack of tangible news. One added negative factor is the oil glut that is presently occurring and that has helped push oil down 12% in value over the same past 2 weeks. Simply stated, the bulls have their back against the wall.

Chart-wise, I would venture to say that a daily close above 18313 or below 17970 in the DOW will be indicative and help the traders decide in which direction to focus their trading. Such closes though, are not likely to happen until after Wednesday's economic news. The bears have a slight edge at this time but it really is a toss-up week because of the economic news scheduled.

SPX Friday closing price - 2139

The SPX generated a positive reversal week, having made a new 10-week low and then closing in the green. Nonetheless, the bulls were not able to close the index in the upper half of the week's trading range (closed 2 points below the mid-point), suggesting that the traders will be waiting for the economic reports due out on Wednesday to make decisions.

The SPX has been the pivotal index over the past 10 weeks (since the new all-time highs were made) and as such it is the index the traders will likely depend on to make decisions, especially this week when the scheduled announcements are fundamental and key to the financial industry.

To the upside and on an intra-week basis, the SPX will show minor but short-term pivotal resistance at 2151 and then minor to decent but likely longer term pivotal at 2177. On a daily closing basis though, there is decent and pivotal resistance at 2159.

To the downside and both on an intra-week and daily closing basis, minor to decent, as well as pivotal support will be found at 2119. Below that level, there is very minor support at 2085 and minor but short-term pivotal at 2074. Stronger support will be found at 2050, which includes the 200-day MA, currently at 2058.

The SPX will be the index the traders watch the closest this week, given that further direction is going to be all about the interest rate assumptions. On a daily closing basis, a close above 2159 or below 2119 are likely to be decisive as far as direction for the short term is concerned. It is unlikely though, that either of those levels will be broken prior to the economic reports on Wednesday.

As far as the September-October swoon, the SPX corrected 8.9% in 2102, 4.8% in 2013, 10% in 2014 and 7.6% last year (2015). As such, potential downside targets would be 2087 (4.8%) or 1973 (10%).

Using the charts alone, the probabilities slightly favor the bulls in the SPX this week, mostly because of the successful retest of the previous all-time weekly closing high. Nonetheless, on a fundamental basis it would have to be said that the bears have the edge.

NASDAQ Friday closing price - 5244

The NASDAQ generated a positive reversal week, having made a new 7-week low and then closing in the green. In addition, the bulls were able to negate the failure to follow through signal given the previous week, having closed on Friday above the previous all-time weekly closing high at 5210 that had been broken with a close at 5125 the prior week. The index closed near the highs of the week and further upside above last week's high at 5254 is expected to be seen.

The NASDAQ outperformed the other indexes this past week with the help of 3 stocks (AAPL, AMZN, and PCLN) that outdid the market. AAPL rallying 12% off of the unveiling of the new IPhone, AMZN making a new all-time weekly closing high off of the buy recommendations being reiterated with higher price targets and PCLN continuing is strong uptrend by making new all-time intra-week and weekly closing highs.

The NASDAQ has been the leader to the upside because of the resurgence of buying interest in the Tech Sector and given that the 3 stocks mentioned above are likely to continue higher this week, especially at the beginning of the week before the pivotal economic reports come out, the probabilities of a new all-time high being made are high. Then again, it was expected that the NASDAQ would be outperforming the other indexes (see the last 4 newsletters) just prior to the September-October swoon coming into play.

The NASDAQ has actually had a very consistent September-October seasonal correction, given that it has happened every year since 2012, with a 12.4% in 2012, 6.9% in 2013 (minor compared to the other years), 10.8% in 2014, and 9.6% last year in 2015. The downside objectives of this seasonal correction could be as little as 4922 (6.9%) to as much as 4631 (12.4%). By the same token, it is unlikely that it will be 6.9% since that year the correction was simply a small "blip on the radar" and did not start with the kind of volatility and strong moves seen the past 2 weeks.

To the upside and on an intra-week basis, the NASDAQ will now show minor resistance at last week's high at 5254, minor to decent between 5271 and 5275 and decent at the all-time high at 5287.

To the downside and on an intra-week basis, the NASDAQ will now show minor to perhaps decent support between 5189 and 5197, minor at 5109, and decent at 5097. Below that level, minor to decent support is found at 5000-5011.

The bulls have short-term control of the NASDAQ and having closed just 43 points below the all-time intra-week high at 5287, the probabilities are high that a new high will be made on Monday or Tuesday, before the Fed and BOJ reports on Wednesday. In previous newsletters, I had mentioned a possible upside objective of anywhere between 5300 and 5387 that would occur before the September-October seasonal swoon. That area is likely to be the objective with 5300-5330 being the most likely since it is considered the general resistance found 300 points above 5000.

By the same token and using the previous 4 years of the September-October swoon, the NASDAQ is likely to see about a 10-12% correction thereafter (down to about the 4700 level). Probabilities favor the bulls at the beginning of the week and the bears in the latter part of the week. NASDAQ.

The indexes gave mixed signals this week with the DOW underperforming and the NAZ over performing. That action and preferences will likely continue the same at the beginning of the week prior to the Fed and BOJ announcing whether interest rates will raise or remain the same and whether more Stimulus or not will occur. By the same token, the bulls have little to gain after the announcements as it is "expected" that the Fed will not raise interest rates and the BOJ will offer additional Stimulus and anything different to those choices would be seen as a strong negative. As such and with the seasonal swoon period likely to start this week, the bears seem to have an edge, at least as far as how the end of the week will turn out.

Oil is also likely to be a negative catalyst this week as the glut continues and the meeting between Russia and Saudi Arabia to talk about possible production limits will not occur for another 2 weeks, suggesting that oil will continue lower, which in turn would help the bears in the index markets. Additionally, volatility continued high this week which does ultimately favor the bears.