DOW Friday close at 10318

The DOW confirmed the breakout above the 100-week MA with a second close above the line this past week. Nonetheless, the index came under some pressure late in the week as there were a few earnings and economic reports that came out less than expected, causing the index to falter in its upward momentum. As such, the probabilities now seem to favor a retest, over the next week or two, of the breakout of the 100-week MA presently down at 10,000.

It is important to note that this past week the DOW did fulfill the objective of the inverted Head & Shoulders formation when it closed above 10399. Fulfilling the objective does take away one of the strong chart reasons the index had for reaching these levels.

On a weekly closing basis, there is no resistance whatsoever until the 200-week MA currently at 11200 is reached. On a daily closing basis, there is now minor to decent resistance at Tuesday's close at 10437. Above that level there is nothing until minor resistance is reached at 10851. On a weekly closing basis, decent support is now found at the most recent low close at 9713 and again at 9488. On a daily closing basis, there is minor support at 10197, again at 9996 and a bit stronger at the 50-day MA currently at 9918.

The DOW continued the up-trend this past week but gave notice that further upside for this coming week is unlikely. The index seems to have run into a brick wall up between 10425 and 10438 as every day this past week, with the exception of Friday, the index traded up into that area without being able to get above it. Having reached the objective of the inverted Head & Shoulders formation early on Monday, the index found further upside impossible to achieve. That was particularly indicative since there was no previous resistance of consequence at that level.

Generally speaking, confirmed breaks above an important line as the 100-week MA is, get tested before any continuation is seen. As such, drops back down to the 10,000 level are likely to be seen before the traders attempt to generate further upside, above the highs seen this past week. In addition, the index could use a pause to get rid of some of the overbought condition that exists, what better time to accomplish such a pause than a holiday week when a large portion of the traders are out.

It is interesting to note that for the past 3 months the DOW has generated a rally starting around the 2nd of the month and ending about 10 trading days later. In each case the top of the rally took about 4 days to fulfill with each day showing about the same high. After that, the index has dropped for about 6 trading days ending at the 50-day MA. The exact same situation seems to be happening this time as the index started this latest rally on the 2nd of November, found the top on the 16th, traded around that level for 4 days in a row, and is now showing the beginning of a move down. If the pattern continues, the low of the move will likely occur on Monday the 30th or Tuesday the 1st and down at the 50-day MA which will likely be around 9970 on that date.

Probable trading range for the week 10342 down to 10021.

NASDAQ Friday Close at 2146

The NASDAQ closed lower this past week than the previous week making last week's close at 2167 into a resistance level that fits in perfectly with the two high weekly closes seen during the bull run in 2005 at 2175 and 2185. In addition, with the intra-day rally this past week up to 2205, it can be said if the index does not rally higher this coming week, that it has reached and tested the 200-week MA currently at 2210 successfully. The 200-week MA must be considered a major line of resistance.

If all of this is confirmed this coming week with another weekly close below 2167, it is possible to believe that the high for the next few months has been accomplished. Suffice it to say, that the NASDAQ has been the index to watch as of late and this week it was the index showing the most weakness.

On a weekly closing basis, resistance is decent to strong at 2167 and strong at the 200-week MA currently at 2210. On a daily closing basis, resistance is strong at 2198 and decent to strong at 2176. On a weekly closing basis, support is now strong at 2045/2048, and decent at the 100-week MA currently at 2000. On a daily closing basis, support is minor at the 50-day MA currently at 2126, minor to decent at 2099, and strong at 2045/2048.

The NASDAQ did fulfill all of its upside objectives having closed the previous week at 2167 (2005 high weekly closes at 2175 and 2185) as well as having come within 5 points of reaching the 200-week MA at 2210 (got up to 2205). In addition, after fulfilling these objectives the index sold off strongly, compared with the other 2 indexes, and gave notice that further upside above the recent highs is unlikely.

It must also be mentioned that the NASDAQ closed on Friday below a minor daily close support level at 2149 that if confirmed on Monday with another red close would be considered a small sell signal. With only minor support at 2091, if such a sell signal is confirmed, drops down to the recent strong support at 2045 would likely occur.

The NASDAQ did leave an open gap between 2180 and 2177 that could be a magnet if the index rallies. By the same token, if the high seen this past week at 2205 is a major high, this gap could be left open and become a breakaway gap, followed at some point with a runaway gap. It must also be mentioned that there is a gap below between 2118 and 2128, on both the daily and weekly chart, that has a high probability of being closed this coming week. These two gaps could play an integral part of the trading for the week, as well as the outlook for the next few months.

Closure of the gap at 2118 could become a strong sell signal as it will make last week's rally above the previous intra-week high at 2176 into a false breakout and generate a failure to follow through signal that would bring is strong selling. Such a break, at these very important resistance levels, would likely cause the index to drop down to at least the 100-week MA currently down at 2000.

The NASDAQ is not generally the index to watch, regarding the outlook for the indexes. Nonetheless, since it is unlikely the other indexes would go in opposite directions, at these levels it does become the leader on the charts. It also needs to be re-mentioned that during the past 10 weeks, when the DOW and the SPX have continued to make new highs, the NASDAQ finds itself having closed on Friday 22 points below the intra-week high made 10 weeks ago. This is a strong indication that the buying has totally dried up in this index, and this is in spite of a great earnings report quarter.

As such, when all the factors seen this past week are added up, it seems safe to say that further upside, at least for the rest of the year, will be close to impossible to achieve.

S&Poors 500 Friday close at 1090

The SPX did close lower this week than the previous week thus making last week's close at 1093 into a possibly successful retest of the 100-week MA, if the index once again closes lower next Friday. Nonetheless the close was still above the 100-week MA (currently at 1087) and therefore the close on Friday was not a defining event.

The SPX did have what looked like a failure week as the index broke and closed above the previous daily closing high at 1098 (closed at 1110) but at the end of the week failed to confirm the breakout closing below the previous high daily close. Such action must be considered a failure to follow through signal.

On a weekly closing basis, minor resistance is found at 1093 (previous week's close). Above that level there is no recent resistance until the 200-week MA currently at 1238 is reached. Nonetheless, going back to 2004, some resistance may be found at 1157. On a daily closing basis, there is now decent to strong resistance at 1110, and decent resistance at 1098/1099. On a weekly closing basis, support is decent at 1036 and strong at 1025. On a daily closing basis, there is minor support at 1087, decent support at 1043/10044, minor support at 1036, and strong support at 1025.

Having broken above the previous high at 1101 (1098 on a daily closing basis) the SPX should have continued on higher. Nonetheless, it didn't and that has now put a big question mark in the heads of the traders about whether the index will continue the up-trend, at least for the next 6 weeks. In addition, the 100-week MA is an important line and though the index is now above that line, it isn't above it by a substantial margin (3 points) and that makes the break very iffy.

During the next couple of weeks there will be quite a lot of end-of-the-year book squaring and having been in a 8-month up-trend of consequence, the book squaring will likely mean liquidation of long positions. With the recent upward momentum having hit a brick wall this past week and now facing a week of likely low volume due to the Thanksgiving holiday, it is probable that traders will be more likely to liquidate than institute new long positions. Even if liquidation does not yet occur, the probabilities of further upside this coming week are low.

With lower expectations for upward movement toward the 1200 area, it is likely the traders will be drawn more toward a more probable move back down to the 1000 level, which is considered a major support level at this time.

Any daily close below 1087 will be considered a short-term sell signal that will likely cause the index to drop down to the 50-day MA currently at 1072. If that line does not hold, and it didn't the last time the index dropped down to the line, drops down to the strong support at 1036 will become probable. It must also be mentioned that the 100-day MA will likely be at that level in about 2 weeks, giving that area added support, but also added magnetism. The 1100 level (1099 on a daily closing basis) should now act as strong resistance.

The upside momentum in the indexes came to a screeching halt this past week when upside objectives were reached. In addition, the economic and earnings reports that came out late in the week did not give the bulls the added ammunition they needed to generate further upside. Heading into a low volume week due to the holidays, and with the upper momentum stopped, it is likely that drops down to once again test support levels will be seen.

It must also be mentioned that the week after Thanksgiving will be the start of end-of-the-year liquidations and with such a strong up-trend seen this year, hedge funds and large institutions are likely to want to lock in profits for the year. As such, it is more likely that the selling for the next 6 weeks will be stronger than the buying, at least from a profit-taking scenario.

It must also be mentioned that the indexes have surpassed the expectations of even the most bullish investors and gone above psychological levels that are likely to be a magnet for the next few months. As such, it is likely that the end of the year will bring closes near those psychological levels with the DOW likely to close around 10,000, the NASDAQ around 2000, and the SPX around 1000. With all of these indexes above those levels, the probabilities seem to favor a small downtrend for the next 6 weeks.