DOW Friday close at 10336

The DOW once again traded within the range (10517 to 10236) the index has traded in for the last 5 weeks. Nonetheless, in spite of more good economic and earnings news this past week, the index generated the first down week close in 7 weeks, giving notice that further upside before the New Year is highly unlikely. The main reason for the weakness was the strength of the dollar, which came as a result of fears that the Fed would have to raise interest rates sooner rather than later.

DOW reacted to the break of major resistance in the dollar by halting its upward momentum and trading back down to the support levels established over the past month. With the holiday period in full bloom and likelihood traders for the next couple of weeks will be liquidating positions for the end-of-the-year book squaring, the index saw buying interest decline and profit taking begin.

On a weekly closing basis, there is minor resistance at the previous week's closing high at 10472. Above that level 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 and strong at 10501. 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 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 Dollar has broken through a major resistance level and is likely to continue higher until at least the next unemployment report comes out on January 8th. During this period of Dollar strength, the DOW is likely to be under some selling pressure with the 10,000 level as a probable objective. Certainly, from a psychological perspective, for both the bulls and the bears, a close around 10,000 at the end of the year would give both sides a reason to expect further movement in their direction next year.

From a chart perspective, the DOW was able to make new 14-month daily closing highs this past week but was unable to follow through on them giving the index a failure-to-follow-through signal in the process. Such a signal, in conjunction with the continued expected strength in the dollar, is likely to bring in some decent selling as the year winds down.

Resistance will now be strong at the previous daily closing high, before the close at 10501, at 10472. Rallies up to that level could be seen but it is unlikely that any new 14-month highs will be made, at least not until the New Year's earnings and economic reports come out. In addition, any break of the previous week's low at 10236 should generate profit-taking momentum toward a drop to the 9700-10,000 area. A drop down to test the break above 100-week MA, currently at 10,000, cannot be considered a negative but a necessary correction/consolidation phase if the index is to go higher in the New Year, such a drop in price will likely be welcomed by both bulls and bears.

Based on the weakness seen in the last couple of days of the week, it is likely that further weakness will be seen this coming week. Nonetheless, the DOW did close on a positive note on Friday and it is possible the beginning of the week will show some strength. Resistance will be decent up at the 50 60-minute MA currently up at 10430. In addition, there is also previous intra-week resistance of some consequence at 10438. As such, it is likely that area will be the high for the week. Drops down below 10236 will likely occur with 10171 as the next support found. As such, probable trading range for the week could be 10438 to 10171. This would fit in well with the previous week's trading range of 251 points.

NASDAQ Friday Close at 2210

The NASDAQ received a strong boost on Friday with the much better than expected earnings reports in RIMM and ORCL, two of the more visible stocks trading in that index. As such, the index was able to generate a new 14-month weekly closing high above the previous weekly closing high at 2194, and above the 2003/2005 weekly closing high at 2192. Nonetheless, the index was unable to close above the 200-week MA currently at 2210, giving notice that the breakout of the very important MA has not yet occurred.

On the daily chart, in spite of the major rally in those 2 stocks on Friday, the NASDAQ was unable to get above the intra-week high at 2220 or close above the daily close high for the week at 2212. In addition, in spite of the major positive surprise in RIMM, the stock was also unable to get into the gap left 3 months ago at the previous earnings report at 71.42 and closed at the psychological resistance level at 70.00. As such, it is possible the index will not have the help of these 2 stocks heading higher on Monday.

On a weekly closing basis, resistance is strong at Friday's closing price of 2210, from the 200-week MA. 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 the week's high close at 2212. 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 2180 and again at 2173. Support is again minor at 2146 and 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.

Based on the fact that the NASDAQ is the index with the strongest level of resistance, in the manner of the very important 200-week MA at 2210, it is likely that everything this coming week will pivot around this index. Nonetheless, since it is a weekly close resistance, intra-week moves will not mean much. As such, the daily close at 2212 will be a level to watch closely for the first couple of days of the week. If that level is broken, resistance is not found until the 2250 level is reached. An intra-day break above last week's high at 2220 or a close above 2212 will likely thrust the index up to that level. Nonetheless, if no follow through is seen on Monday, off of what must be considered a strong close on Friday, selling will likely come in strong.

It must also be noted that since November 6th, the NASDAQ has been successful in holding itself above the 20-day MA, on a daily closing basis. The index has already tested that line on 3 occasions and held itself above it every single time. The 20-day MA is currently at 2180 and if the index is able to close below that line on any day this week, drops down to the 50-day MA, currently at 2154, will likely occur. As such, the parameters are clearly defined for the NASDAQ for the next few days with 2212 and 2180, on a daily closing basis, being the levels to watch. Any close above or below those two levels is likely to generate further movement in that direction.

With the holiday period upon us and the likelihood of end-of-the-year profit taking as well as waiting for the New Year's economic and earnings reports to come out, the probabilities favor a sideways to slightly down action over the next couple of weeks. Nonetheless, if the DOW starts heading toward the 10,000 level, it is possible that the NASDAQ could also get some stronger profit taking binge and head down to the strong psychological support at 2000.

S&Poors 500 Friday close at 1102

There is no index like the SPX that exemplifies the sideways trading range the indexes find themselves in at this time. The coil I mentioned last week between 1084 and 1119 continued to be in effect this week with a trading range between 1116 and 1094. In effect the coil continued to wind itself within a trading range that, at present, means absolutely no clear direction.

Nonetheless, like with the DOW the index had the first down close in the last 7 weeks, suggesting that further upside may not be coming for at least the next few weeks. Unlike the other indexes, though, the SPX chart seems to say that no movement of consequence is likely to be seen this coming week, though a drop down to the bottom of the coil at 1086 could be seen.

On a weekly closing basis, minor resistance is found at last week's 14-month weekly closing high at 1106. Above that level there is no resistance whatsoever until the 200-week MA, currently at 1237, is reached. On a daily closing basis, resistance is now decent to strong at 1111 and strong at 1114. 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 SPX did break above the double top on the daily closing chart at 1111 this past week, with a close at 1114. Nonetheless, like with the DOW, the index failed to generate any follow through to that breakout and swiftly gave a failure to follow through notice with closes below the previous closing high at 1111, as well as with a close below the previous week's close. In addition, by getting above the previous week's high at 1111 but not above the high 2 weeks ago at 1119 (this week's high was 1116), it can be said the index now show a likely successful retest of the high at 1119. As it is, many analysts have been stating that the 1120 level in the SPX must be considered a major objective and strong resistance, based on PE ratios presently in place in the index.

The bottom of the coil formation at 1086 is a likely area where a short-term signal could be seen. A break of that level should take the index down to the 1054 level at least. Such a break, though, could generate enough selling to cause the index to fall down to its major psychological support at 1000. Nonetheless, the action this past week seems to suggest that for at least the next 3 weeks, no new 14-months highs will be made, giving the option of either sideways or slightly down movement occurring.

It must be mentioned that for the past 6 weeks the SPX has been trading above the 100-week MA and that line is presently at 1074. Any weakness this coming week could cause the index to test that line. On the daily chart, though, the 50-day MA is currently at 1088 and is within the parameters of the coil formation. As such I would venture an educated guess that this week's trading range will be between 1112 and 1088, keeping the index within the coil for yet another week.

The indexes all made new 14-month highs this past week but in most cases failed to follow through. With a short 3½ day trading week this coming week, as well as a dearth of important reports, the likelihood is that the indexes will trade in narrow trading ranges with a slight downward tinge. This outlook is based on the failure to follow through seen last week as well as on the likely continued strength of the dollar.

Nonetheless, there were a couple of strong earnings reports on Friday giving the NASDAQ unexpected strength and placing the index at a level that could generate further upside if the stocks continue to move higher this coming week. As such, Monday is likely to be the indicative day of the week as a green close on that day, especially in the NASDAQ, would likely give the traders reasons to keep buying. With the probable low volume and participation that a holiday week brings, it is possible that traders could generate additional upward momentum.

On the other side of the coin, institutional traders are likely to be closing out the books for the year and taking profits. Such selling will likely keep the indexes under wraps until the New Year begins.