DOW Friday close at 10472

The DOW once again made a new 14-month weekly closing high this past week extending to 5 weeks in a row its upward weekly close movement since the last minor correction at 9713. The economic news continues to show better than anticipated numbers, giving impetus to higher prices. With no previous resistance above until the 200-week MA at 11200 is reached, there seems to be no reason at this time for thinking the index will stop moving higher, especially if the economic reports continue to show improvement.

Nonetheless, it must also be stated that the upward movement recently has been extremely minimal and even though new weekly closing highs have continued to be seen, for the last 4 weeks the DOW has only been able to go up, intra-day, 79 points in value. Volume has been extremely low and participation in the market has continued to drop. Much of this is due to the holiday season but some of it is the overall belief that the market is fully priced at this time.

On a weekly closing basis, there is no resistance until decent resistance at the 200-week MA, currently at 11200, is reached. On a daily closing basis, resistance is decent at 10472. On a weekly closing basis, decent support is now found at the 100-week MA currently at 10000. At that level, there is also a previous weekly high close at 9996 that is likely to add strength to that support. Below that, there is no resistance until decent resistance is found at 9713. On a daily closing basis, there is decent support at 10310/10318 and a bit stronger at 10286. Below that there is minor support at 10197 and then nothing until the 50-day MA currently at 10,060.

The DOW gave a small sell signal on the daily closing chart on Tuesday when it was able to close below decent support at 10310. Nonetheless, the economic reports seen thereafter were all better than anticipated and the index was able to negate the sell signal the next day and generate a late-week rally. Nonetheless, on Friday, after the Retail Sales and Michigan Sentiment reports came out much better than anticipated, the index was unable to make new intra-day 14-month highs and closed out the week with a big question mark as to what to expect this coming week.

This coming week looms somewhat important because one of the questions that that has put a temporary hold on the rally in the indexes is the possibility that the Fed will be tightening credit sooner rather than later, as unemployment seems to be easing. As such, this week's FOMC meeting minutes could have more of an impact than they have had in recent months. This is especially true since PPI and CPI numbers are due out on Tuesday and Wednesday, before the Fed releases the minutes of the meeting. Both the PPI and CPI numbers are anticipated to come out higher than last month, with the PPI due to be the highest seen in the last year. As such, it is likely the wording of the minutes of the FOMC meeting will be closely scrutinized and have more of an impact than has been seen as of late. Remember that at this stage of the game, after a 9-month inexorably rally, even the threat of tighter credit is likely to put the indexes into a strong correction.

Having been unable to make new 14-month intra-week highs on Friday, especially after the much better than anticipated Retail Sales and Michigan Sentiment reports, it is likely the DOW will see some selling pressure early in the week. Just as the recent high at 10517 was tested on Friday, it is possible that the recent low at 10236 will be tested as well. At that level a double bottom has been built using the November 27th low at 10231. Drops back down to around 10286 and/or 10310 are certainly possible and even probable if the index fails to rally on Monday.

The key to the first couple of days of the week will be the 10390 level where the 50 60-minute MA is currently located. That level must be considered at this time to be a strong pivot point for the index. A break of that support will put the index under pressure and moving down near the 10300 level. Nonetheless, if the iDOW is able to get above the recent high at 10517 on Monday, probabilities will favor continued upside until Wednesday when the FOMC decision is released. With quite a few relatively important reports due out this week, it is impossible as of this writing to give you a clear probability rating on where the DOW will trade this week, until those reports and the reaction to them is seen. Due to the inability of the index to make new highs on Friday, though, it is safe to assume the index will probably trade within the recent trading range (10300-10500) until Wednesday. After that it will all depend on the reports and the minutes of the FOMC meeting.

NASDAQ Friday Close at 2190

The NASDAQ was the only index that closed lower than the previous week. In doing so, the index confirmed last week's close as a successful retest of the 200-week MA as well as of the high weekly close seen during the last bull market between 2203-2005 at 2192. As such, if this index is indeed the one to follow on the charts, it can be said that the upside has been fully accomplished as all the retesting that is necessary has been done.

It must also be explained that the NASDAQ has been trading between the 100-week and 200-week MA since it broke above the 100-week MA 14 weeks ago. The index has since tested the 100-week MA successfully on 2 occasions and has been up near the 200-week on 3 occasions, having touched the line once. As such, it seems likely that until the New earnings seasons starts in January, that the index will continue trading between these two lines for the next 4 weeks. The likely trading range is 2000-2200.

On a weekly closing basis, resistance is decent at last week's high close at 2194 and strong at the 200-week MA currently at 2210. Above that level, though, there is decent to strong resistance at 2250 from a total of 7 previous weekly closes in that area between 2004 and 2009. On a daily closing basis, resistance is minor to decent at 2194 and strong at 2204. On a weekly closing basis, there is minor support at last week's close at 2138. Below that level there is no support until strong support is found at 2045/2048. Strong support is also found at the 100-week MA currently at 2000. On a daily closing basis, support is minor at 2173 and again at 2146. Support is decent at 2138. Below that level there is no support of consequence until the 100-day MA currently at 2090. Strong support is found at 2045/2048.

It is important to note that the NASDAQ was the only index to close in the red on Friday, as well as below the previous weeks close. Having received good economic reports on Friday, the red close is likely indicative that in this index the selling is strong at these levels. As such, the NASDAQ continues to be the index to watch, especially now when all of the upside objectives have been reached and resistance of consequence found.

The NASDAQ is still showing an open gap between 2147 and 2156 that is likely to be a magnet this week, if Friday's high at 2202 is not broken early in the week. It must also be mentioned that the index has also built a mini Head & Shoulders formation with the left shoulder at 2205, the head at 2214, and the right shoulder possibly at Thursday's high at 2203. The necklines would be at 2114 and at 2156. This means that if 2156 is broken, a drop down to 2100 would probably occur. With the 100-day MA currently at 2090, such an objective is very viable.

Not only did the NASDAQ close in the red on Friday, but the index was unable to get above Thursday's high at 2203. In addition, the index closed in the lower half of its trading range increasing the probabilities of follow through to the downside on Monday. With the other two indexes going above Thursday's high, as well as closing in the upper half of their trading ranges, the discrepancy raises questions as to which index the traders likely to follow on Monday. My personal feelings on this are that the NASDAQ is the index to follow at these present levels. As such, my educated guess would be for lower prices the first couple of days of the week, having closure of the gap down at 2147/2156 as the main objective.

Nonetheless, like with all the indexes, this analysis might be moot after Wednesday's FOMC decision is released.

S&Poors 500 Friday close at 1106

The SPX did not make any kind of a statement this week closing at the same price as the previous week and likely leaving the decision on where it is heading until after the FOMC decision on Wednesday. The index continues to trade above the 100-week MA but not in a decisive way as the index is presently only 15 points above that line, and not having been able to go higher than 21 points for the past 4 weeks. As such, the break above the 100-week MA has not meant all that much for the index.

The trading range in the SPX for the past 4 weeks has been minimal as the index has traded within a 20 points of the high and low daily close. The index shows 3 daily closing highs between 1109 and 1111 and 3 daily closing lows between 1091 and 1092. Such action seems to be a statement that until a catalyst of consequence occurs, more of the same will be seen until the New Year arrives.

On a weekly closing basis, there is no resistance whatsoever until the 200-week MA, currently at 1237, is reached. On a daily closing basis, there is minor resistance at 1109 and at 1106, and strong resistance at the double top at 1110/1111. On a weekly closing basis, support is minor at the most recent low close at 1091 and again at the 100-week MA, currently at 1078. Below that level there is no support of consequence until 1036 is reached. On a daily closing basis, there is decent support at 1091, minor support at 1087, and decent support at 1043/10044. Strong support is found at 1025/1036.

The action during the past 4 weeks has built a coil formation, which suggests that the breakout or breakdown, when it occurs will be at least the span of the coil. The coil spans 35 points (1084 to 1119) and that means that a break above or below the extremes of the coil will give, at the very least, a 35 point move in that direction (above 1119 it would be 1154 and below 1084 it would be 1049). The coil needs a catalyst and so far, during the coil's life of 4 weeks, no catalyst of enough strength has come out, even though there have been many possible catalysts. As such, it is impossible to predict when it will occur. Nonetheless, knowing the parameters of the coil will give traders a defined objective when it happens.

The SPX is normally considered to be the index to watch as the DOW has lost some of its star value and the NASDAQ has never been the star since the Dot.com era because of it wide array of "common" stock. As such, if one looks at the action of the SPX it can be said that the traders have no clear idea as to where the market is heading at this time. The overall bullish sentiment continues to be voiced in a loud manner through the bullish opinions of most analysts. Nonetheless, when it comes to "making the bet" it is evident no one has been doing that for the past 4 weeks, or that the bets that are being made are evenly matched.

As such, until some decisive move is seen in the SPX, it is likely the indexes will continue to trade in a narrow trading range without direction. Nonetheless, the stage is set and whatever happens in the index above or below the present parameters, will likely be a strong indication of what the indexes will do for the next 3 months.

The indexes all continued to trade without a clear direction and within the recently established trading ranges. With this being now the holiday season, the probabilities favor more of the same for the next 4 weeks.

Nonetheless, there are reasons to think this coming week could be a catalyst. The PPI, Capacity Utilization, and Industrial Production come out on Tuesday and CPI, Housing Starts and Building Permits come out on Wednesday. In addition, the FOMC decision comes out on Wednesday after all those reports are out, likely factoring in those numbers as well as the unexpectedly good unemployment and payroll numbers from the previous week. As such, the Fed decision, and the wording involved, is likely to be one of the most anticipated events of the last few months and likely to have a major impact on the market. This is especially true in December, since volume and participation are so low, making the market possible prey to manipulation by a few traders.

The reports this week are especially important since several of them are already anticipated to be higher than has been seen over the past year. In the case of the PPI and CPI, though, that higher anticipation if realized, could be a strong negative. Breaks above or below the recently established parameters in the indexes will likely bring in strong moves in that direction.