DOW Friday closing price - 18123

The DOW generated a second green close in a row but the bulls failed to make a statement, given that the index traded above the previous high weekly close at 18272 all day on Thursday and 85% of the day on Friday but the index still ended up closing below that level, which can be considered a failure, based on the fact that the NASDAQ made and closed on new all-time highs. In addition, the index closed in the lower half of the week's trading range, suggesting further downside below last week's low at 18093 will be seen this week.

The DOW has not been the leading index as of late but it does represent Blue Chip stocks and the fact that the backbone of the market is giving mixed signals and not performing in a manner that would suggest further upside has to be worrisome for the future outlook of all indexes.

One possible additional negative is that on the weekly chart, the DOW had not yet shown a successful retest of the all-time high at 18668 seen 6 weeks ago and if the bears can get below last week's low at 18093 this week, last week's high will become that required retest of the all-time high. If that does occur, it would put the index less than 100 points above the recent 11-week low at 17992 that if broken would generate a sell signal of consequence that would be meaningful, given that the chart will then have been "fulfilled" to the upside.

To the upside and on an intra-week basis, the DOW will now show minor but short-term pivotal resistance at 18449. Above that level, resistance is found at 18552 that if broken would suggest the all-time high at 18688 will be seen and likely broken.

To the downside and on an intra-week basis, the DOW now shows very minor support at 18212 and minor to decent and definitely pivotal support at 17992. Below that level, there is very minor support 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.

The DOW closed an open gap up at 18446 on Thursday with a rally up to 18449. Closure of the gap can be considered a negative, inasmuch as the gap would have been a magnet for the future had it not been closed. Now that the gap is closed, if the bears generate a new sell signal there is likely to be aggressive selling with follow through seen that will not have any obstacles to overcome other than positive fundamental news.

The DOW is now probably facing a strongly pivotal week as a break of last week's high and low (18449 and 18093) is likely to be indicative. A break above or below 18551 and 17992 is likely to be decisive.

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.

Probabilities favor the bears in the DOW this week.

SPX Friday closing price - 2164

The SPX generated follow through to the upside after the positive reversal and successful retest of the previous all-time high seen last week. The index closed in the upper half of the week's trading range and further upside above last week's high at 2179 is expected to be seen. By the same token and on a negative note, the index closed the gap up at 2177 on Thursday and then generated a red close on Friday, suggesting that it is possible the only reason the index rallied so strongly this week was to get rid of the gap magnet to the upside so that a downtrend could begin.

The SPX was a beneficiary of the Fed deciding not to raise interest rates as a lower interest rate scenario favors the financial industry but the fact that the NASDAQ made a new all-time high this past week and the index failed by 14 points (6 on a weekly closing basis) does not suggest the bulls will be able to generate enough new buying this week to "make it happen". With the index now facing the September to October swoon that has caused a drop of anywhere from a minimum of 4.8% (2013) to a maximum of 10% (2014), the probabilities now favor the bears in spite of the close in the upper half of the week's trading range.

To the upside and on an intra-week basis, the SPX will show minor to perhaps decent but likely pivotal resistance at last week's high at 2179. Above that level, decent resistance is found at 2187 and strong at 2193.

To the downside and on an intra-week and daily closing basis, minor support is found at 2157 and a bit stronger and short-term pivotal at 2147. Below that level there is decent and longer-term pivotal support at 2119.

The SPX is facing a difficult week ahead, given that based on the close in the upper half of the week's trading range, the probabilities favor the bulls and a rally above last week's high at 2179. By the same token, a rally above 2179 would be considered a bullish statement that would likely generate enough buying to take the index up to 2187 and likely even to the all-time high at 2193, which in turn be longer-term bullish as it would suggest the September-October swoon would not occur. On the other side of the coin, a drop below last week's low at 2135 would require a 1.4% drop in price (29 points), which is not a high probability event unless something fundamentally negative occurs or momentum to the downside begins.

In looking at the daily chart of the SPX and the red close on the lows of the day on Friday, it does seem like 2147 could be a "pivotal" level of support this week. Based on last week's 44 point trading range, if the index is to go above last week's high and 2147 is the low of the week, it does open the door for a rally up to 2191. By the same token, if 2147 does not hold up, there is no support until 2119, meaning that a break of 2147 could be a sign that last week's low at 2135 will be broken and that momentum to the downside could begin.

In my opinion, probabilities slightly favor the bears in the SPX, given the September - October swoon.

NASDAQ Friday closing price - 5305

The NASDAQ made a new all-time intra-week and weekly closing high this past week and closed in the upper half of the week's trading range, suggesting further upside above last week's high at 5342 will be seen. By the same token, the index gapped up on Thursday (after Wednesday's Fed rate announcement) and based on a new high being made the index should have followed through on Friday but didn't, meaning that the breakout was not seen as favorably by the traders as the action suggested.

Based on what happened in 2012, the year when the July-August swoon did not occur (like this year), the NASDAQ rallied 2% above the previous peak (3134 to 3195) and it must be mentioned that on this occasion, the index has rallied 2.1% above the previous peak high at 5231, suggesting that if this year the index is going to do what it did in 2012, then the high for the rally has been seen and a drop of 12.1% (down to 4648) will occur.

The NASDAQ has been the leader to the upside because of the resurgence of buying interest in the Tech Sector and given that AMZN and GOOGL made new all-time highs this past week, the bulls seem to have the edge. Nonetheless, if those 2 stocks do not follow through (GOOGL does have some question marks on the chart), selling interest will begin to be seen as just 1 or 2 stocks will not be sufficient to keep the index going higher if the seasonal correction takes hold.

To the upside and on an intra-week basis, the NASDAQ will show some minor resistance at Thursday's high at 5342. Above that level there is no resistance.

To the downside and on an intra-week basis, the NASDAQ shows minor support at 5233 and minor to perhaps decent between 5187 and 5199. Below that level, there is decent support between 5097 and 5109. On a daily closing basis though, any close below 5235 would generate a sell signal.

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 and looking at the general parameters of the 5000 level and considering the correction seen in the year 2012, the probabilities favor a drop down to the 4700 level.

Based on where the NASDAQ closed on the weekly chart, the probabilities favor the bulls. Nonetheless, if the bulls are unable to make a new high early in the week, the probabilities would then shift to the bears.

The indexes gave mixed signals this week with the DOW underperforming, the SPX holding its own, and the NAZ over performing. Nonetheless, with all the important economic news out of the way and the Blue Chip stocks not participating in the new highs, the seasonal September-October correction is likely to gain traction this week.

The economic calendar shows quite a few economic reports of some consequence due out this week (Consumer Confidence on Tuesday, Durable Goods on Wednesday, 3rd estimate of GDP on Thursday, and Personal Income and Spending, Chicago PMI and Michigan Sentiment on Friday) but given that none of these reports are likely to be of consequence to the Fed and its rate decision for the rest of the year, it is unlikely that any of these reports will help the bulls. Oil prices though, may have more of an effect but with oil presently heading lower, it could be of help to the bears.

As such, the week is likely to be more technical than fundamental and with the seasonal correction looming, chart support levels will be pivotal this week.