DOW Friday close at 10170

The DOW erased "all" the gains seen since November 16th in one fell swoop this past week. The support that was so carefully and strongly built at 10231/10264 was destroyed on Friday. The index now finds itself with no support of consequence it can count on until the psychological support at 10,000. As such, further downside will likely be seen this coming week.

The drop in the DOW was far from technical in nature alone as it was based on fears that Obama is going to limit the ability of banks to trade the market with their hedge funds. Such action would certainly take some of the manipulative leverage away from financial institutions. In addition, there was also a growing concern that Fed Chairman Bernake will not be confirmed and that too would be seen as a sign that the support and assistance that Wall Street has enjoyed would be reduced.

On a weekly closing basis, resistance will now be minor at 10472 and again at 10520. Strong to major resistance is now at 10618. On a daily closing basis, there is minor resistance at 10286 from previous low daily closes. Stronger resistance will be found between 10472 and 10520. Above that level, resistance is minor at 10549 and major at 10711/10725. On a weekly closing basis, decent psychological support is found at 10,000. Below that, the 100-week MA, currently at 9900, would be seen as decent to strong support. Actual previous low support is not found until minor to decent support is seen at 9713. On a daily closing basis, there is decent support at 10106 from a previous high as well as from the 100-day MA. Below that, other than the psychological support at 10,000, there is no support until minor to decent support is found at 9713.

The DOW is now under technical as well as fundamental selling pressure. Fear of what the future has in store for Wall Street's ability to conduct business as usual has been shaken with this week's Obama announcement as well as the possibility that Fed Chairman Bernake will leave. As such, the confidence that was felt during the recovery seen over the past 10 months has suddenly disappeared, to be replaced with a period of uncertainty which will not take just a week or two to resolve. As such, investors will be strongly reluctant to purchase any stocks until it is all cleared up. In addition, profit taking from 10 months of rally is likely to continue to occur.

From a chart basis, the ability of the index to break below the support at 10231/10264, which took almost 5 weeks to build, has put the index at levels where buying is not likely to be seen. Certainly the 10,000 level has to be considered strong psychological support, but it is "all" psychological as no previous lows of consequence are seen there. With uncertainty and fear about the effect all these change may bring, it is possible the psychological support may not be strong.

In addition, the spike type action seen this past week (560-point down spike) as well as the close on the lows of the week, suggest that strong further selling will be seen next week. Considering the trading range this past week, as well as the lack of buying, it is possible that a drop all the way down to 9700, or perhaps even lower, could ensue.

Keep in mind that the DOW moved up without any previous weekly correction of consequence. As such, the supports underneath are all minor in nature, and not the kind that will guarantee buying will occur. Much of what will happen this coming week will be dependent on how the news is evaluated. That is not something that at this moment can be factored in to the charts.

One thing for sure, none of the changes that could happen will help the market at this time, even if they are long-term beneficial. The market had gotten itself into a rut and shaking the tree will likely cause a lot of fallout to occur. As such, the only thing that can be factored in is fear of change, and fear of change is not something that generates buying.

Though the chart does show that a rally all the way up to the 10504 level could occur, the resistance at 10428, as well as at 10231/10264, are not likely to get broken until some definition is given to the news. From a psychological basis, the 97.00-10,000 level must be considered the downside objective. Nonetheless, the support there is minor in nature and does not guarantee that buying will occur.

Possible key for Monday will be the 100-day MA currently at 10106. If that level is broken, the selling will increase once again. It is possible, based on the action this week, that panic selling will occur this weekend in Asia and in Europe. If that happens, the DOW could come in substantially lower on Monday.

NASDAQ Friday Close at 2205

The NASDAQ followed up last week's key reversal week with a spike down move that broke below the 200-week MA, currently at 2210. The action, as well as the close below that line, confirmed that the 2326 high seen 2 weeks ago is a likely high that will be in place for at least 6 months, if not longer.

On Friday, the NASDAQ closed the runaway gap that had been in place since December 18th between 2213 and 2224. Having closed that gap, as well as closing on the lows of the week, the breakaway gap between 2147 and 2156 will now become a magnet. Further downside is likely to be seen this coming week.

On a weekly closing basis, resistance is minor to decent between 2250 and 2274. Major resistance is at the most recent high weekly close at 2317. On a daily closing basis, resistance is minor at 2212 and again at 2291. Major resistance is up at 2317/2320. On a weekly closing basis, there is minor support at 2138 and strong support at 2045. On a daily closing basis, support is minor between 2162 (100-day MA) and 2173/2176 (previous high and low daily closes). Below that there is minor support at 2138 and then absolutely nothing until 2045 is reached.

The close on Friday below the 200-week MA, currently at 2210, as well as below a decent previous low weekly close support at 2212, has put the index under strong chart selling pressure. Below this level, the supports are all minor until 2045 is reached. This means, that if the break of support seen on Friday is not reversed with a green close next Friday, the NASDAQ is likely to see strong selling coming in.

Having closed the runaway gap on Friday, the breakaway gap between 2147 and 2156 is now a magnet. Nonetheless, closing that gap would also mean a break below the 100-day MA, currently up at 2176. Such a break could generate new additional selling as well. The support at 2138, on a daily and weekly closing basis, must be considered minor in nature and that means that if that is broken, there is no support whatsoever until 2045 is reached. As such, the action in this index this week could be strongly down.

It must be mentioned that in March and July 2008, the index had 2 strong intra-week lows at 2155 and 2167 respectively. Those lows will be in play and should offer some support. By the same token, a break of those lows will leave the index without any intra-week chart support of consequence until the 2000 level is reached.

The 2210/2212 level will likely be an important pivot point this week on both a daily and weekly closing basis. If the index is able to withstand the selling pressure this coming week and rally to close above that level, it is possible the immediate selling pressure would abate. In that respect, the NASDAQ could be a weather vane this week for what the indexes will do. The probabilities, though, seem to suggest further downside of consequence will be seen.

S&Poors 500 Friday close at 1091

The SPX also fell this week, in a spike down type fashion, but was able to keep itself above the bottom of the coil formation at 1086 that was formed between November 16th and December 7th. Nonetheless, the index closed below all the nearby weekly close support levels and further weakness is expected this coming week.

The SPX closed on the lows of the week and follow through to the downside is expected. With no support at all until the 100-week MA is reached, currently at 1063, it is likely that level will be seen this coming week. Nonetheless, other than the MA, the index shows no previous weekly close support until minor to decent support is found at 1036. As such, it is possible the same kind of downside trading range as was seen this past week (60 points) could be seen again.

On a weekly closing basis, resistance will now be major at the most recent high close at 1145 and minor at a previous weekly closing high at 1126. On a daily closing basis, resistance is decent to strong between 1110 and 1114, decent again at 1128, and major between 1147 and 1150. On a weekly closing basis, support is decent at 1136 and again at 1125. Below that level, there is no previous support of consequence, other than the psychological support at 1000, until an important previous high, as well as 50-week MA, is reached at 970. On a daily closing basis, support is strong between 1086 and 1092 from a slew of daily closes seen there between November and December, as well as from the 100-day MA which is currently at 1086. Below that level, there is no support until decent support at 1036 and again at 1025 is reached. Support will also be found at the 200-day MA currently at 1007.

Unlike the DOW, which broke below its Nov/Dec supports, the SPX was able to hold above them. Nonetheless, having closed on the low of the week, follow through is expected. Any close on Monday by more than 6 points (below 1086) will likely bring strong selling thereafter as no support of consequence is found until 1036 (1029 intra-week) is reached.

Nonetheless, like with all the indexes, the selling that was seen this past week in the SPX was based on fears that the possible changes occurring will be negative to the market overall. As such, technical support levels, such as 1086 is, are not likely to hold up due to the rash of profit taking and fear selling that is being seen.

Based on the trading range for last week (60 points), drops down to 1030 are definitely possible. Evidently, though, the 1086 level will be the pivot point for the week, but if that level is broken early Monday morning, much more profit taking as well as new selling will likely be seen. On the upside, Friday's high at 1115 will be considered strong resistance for this coming week. Evidently if all the negative action from Friday gets erased, and the SPX is able to get above the now strong resistance between 1110 and 1114, the buyers will gain confidence again.

Some panic selling was seen in the indexes on Friday after the news came out that the government is planning to limit the ability of financial institutions to trade as hedge funds. Whether this comes to pass or not, is not as important as the fact that it is not likely that will be resolved in a day, a week, or perhaps even a month. As such, it is highly unlikely that the bulls will be aggressively buying the indexes for an indeterminate period of time.

In addition, all the indexes have enjoyed a major rally that lasted 10-months and that was the strongest rally seen in the last 70 years. As such, it can be said that profit taking is likely to continue until a good corrective phase occurs. It must also be mentioned that the 10-month rally was so straight up that there are no support levels of consequence built that the traders can rely on. That means that technical buying (not fundamental) will be limited in scope.

It is evident, though, that there are some important psychological areas nearby, such as in the DOW 10,000, SPX at 1000 and in the NASDAQ at 2000. Some buying of consequence will likely occur if those levels are reached. Nonetheless, until the fundamental fears are put to rest, no level of support can be relied on to hold.