DOW Friday closing price - 9932

For the first time in 7 months, the DOW closed below the 10,000 level this past Friday. The weakness was basically generated with a lower than anticipated Jobs Creation report showing that the economy is not continuing to grow, at least as far as new hiring's are concerned. With no support of consequence between the 10,000 level and the 200-day MA, currently at 10290, the bears were successful in selling the index down without much problem. In addition, the break of the 200-day MA 2 weeks ago was a definite signal that the uptrend has come to an end, at least for the next couple of months, and having tested that break successfully on 2 separate occasions over the past 2 weeks (the last one on Thursday), it soon became evident to the bulls that further upside was unlikely to be seen any time soon and a strong profit taking surge came in.

The DOW is now on the defensive and with no economic reports of consequence due out this week, at least not until the Retail Sales number comes out next Friday, the bulls will not have much ammunition to generate rallies of consequence. Having closed below the 10,000 level on Friday that level will now become strong psychological resistance and though attempts to get above that level are likely to be made, the probabilities favor failures occurring, at least on a daily closing basis, and further downside to be seen.

On a weekly closing basis, resistance will be decent to strong between 9972 and 10012. Above that level there is no resistance until decent resistance is found at 10620. On a daily closing basis, there is decent resistance between 10081 and 10092. Above that level there is now very strong resistance at 10259/10254 from the 200-day MA as well as from a double top built over the past 2 weeks. On a weekly closing basis, support is minor at 9713, decent at 9540 (100-week MA) and minor again at 9488. Below that level, there is minor support at 9325 and again at 9035. On a daily closing basis, support is minor to decent at 9908 and then nothing until 9713. Below that, there is minor to decent support at 9488, minor at 9281 and minor again at 9135.

It is evident that having broken below the strong support at 10,000 and closing below the small psychological support/resistance between 9970 and 10030 (the demilitarized zone) that the probabilities favor further selling on Monday. Nonetheless, there is a larger psychological support/resistance level at 300 points above and below the main number (10,000). That means that some general support can be expected to be seen at 9700. If that doesn't hold, a drop down to the 100-week MA, currently at 9540 should offer some buying support.

The big problem the DOW has, though, is that the index did not have much of a chance to build strong chart supports on the way up as corrections to the uptrend were short and generally small. As such, all supports below 10,000 can only be considered minor to decent at best. By the same token, just prior to the worse than expected Jobs Creation report, the index was showing some strength and the report itself, though not as good as expected, was still a gain and not a loss. In addition, the Unemployment number did go down more than expected (from the expected 9.8% to 9,7%), making the report negative but not dramatically so. As such, the weakness seen on Friday was likely due more to the lack of chart support between 10,000 and 10300 than the report itself.

Unfortunately for the bulls, there are many catalysts that could come out at any time that would be negative (mainly Europe's financial woes), while there are very few catalysts (until the new earnings reports season starting in July) that could help the market. As such, the traders will be reluctant to be aggressive buyers, whereas they could end up continuing to be aggressive sellers.

It was evident early on Friday that the market would be under selling pressure all day and therefore little buying was to be expected. Nonetheless, it is likely the bulls will try to do something on Monday to stem the tide and defend the 10,000 level. It is likely that overnight in both Asia and in Europe that further selling will be seen, possibly generating a strong down opening on Monday. Nonetheless, starting at 9700 and on down to 9540, it is probable that bargain hunting will be seen stemming the tide and generating a rally back up near the 10,000 level, especially since the traders have been programmed over the past 14 months to buy dips. There is also a small possibility that bargain hunting will occur overseas on Sunday and Monday morning and the index would open higher. Nonetheless, that would likely be more bearish than bullish unless the index was able to get above the 10120 level where all the intra-day MA's (20, 50, 100, and 200 15-minute) are currently located.

The probabilities do favor a lower opening due to the weak close on Friday, but from that moment on, it will all depend on what weekend evaluation the traders will have made of the news that came out on Friday. There are 2 probable trading ranges for Monday, based on the 425 trading range seen on Friday. 1) 9700 to 10125 or 2) 9540 to 9970. Continued volatility, though, is a high probability.

NASDAQ Friday closing price - 2219

The NASDAQ closed on Friday at the 200-week MA which is probably the most critical and indicative line that exists in all the indexes. The index has broken below that line intra-week on several occasions over the past 2 weeks but every Friday, including this past Friday, the index has managed to close above that line. By the same token, the index did go above last week's high, generating what can be considered a retest of the highs, and closed on the lows of the week, which suggests the index will not only be under selling pressure this coming week but with high probabilities of closing below the line next Friday.

On the other side of the coin, the NASDAQ is the only index that shows a strong array of intra-week support levels near-by that the traders can somewhat depend on. As such, the NASDAQ will continue to be the most indicative index likely showing whether the market is heading substantially lower or trading sideways for the next week or two.

On a weekly closing basis, very minor resistance is found at 2257. Above that level, decent resistance is found at 2317 and minor to decent resistance is at 2347. Major resistance is up at 2530. On a daily closing basis, minor resistance is now found at 2278, decent at 2303 and decent to strong at 2320. On a weekly closing basis, support is strong at 2218 (200-week MA) and decent at 2212. Below that level, there is strong resistance again at 2141 and nothing until the strong psychological support at 2200, as well as at the 100-week MA, currently at 1970. On a daily closing basis, support is decent at 2196, decent again at 2126, and decent to strong at 2048.

As mentioned above, the NASDAQ does show a big array of intra-week support levels (5 to be exact) that go back to Jan08 between 2141 (most recent) up to 2203 (oldest). Likely the strongest area of support, using those intra-week lows, is between 2155 and 2167. As such, the traders are likely to be looking at this index for clues as to how bad this break is. Evidently if the index gets down to 2155 and rallies, not only will the 2-year support level hold up, but the recent low at 2141 will also be tested successfully. Nonetheless, that still puts the index down as much as 64 points this coming week at some point, making the expected downside follow through come true.

It must be mentioned that the NASDAQ also broke and closed below the 200-day MA, currently at 2228 and in conjunction with the potential break of the 200-week MA, it is likely that those two levels will be objectives as well as possible pivot points all week long. Based on the close on Friday, a drop down to 2166 (the low made on May 21st) is highly likely to be seen on Monday. That would put the index down about 53 points and the DOW down around 250 points. If those levels hold up, a rally will then likely occur.

If the index is able to start trading above the 200-day MA at 2228, a rally up to 2278 could occur. Nonetheless, 2278 is now considered a strong resistance that is highly unlikely to be broken without some unexpected good news coming out. As such, as of this writing, I would expect a trading range for the week between 2166 and 2228, but with a slight possibility of the index getting all the way up to 2278.

All eyes, though, will be on the close next Friday as a close below the 200-week MA would likely cause a drop down to the 2000 level over the next few weeks, putting the DOW down to the 9000 level.

SPX Friday closing price - 1065

The SPX, unlike the DOW that closed substantially below its strong support level giving a sell signal on the weekly chart, only managed to close 1 point below its strong support level at 1066. As such, questions were left unanswered as to whether the index has in effect given a sell signal on the weekly chart or not.

By the same token, the SPX did test the 200-day MA successfully on 2 occasions, and in fact built a double top on the daily closing chart 1103. In addition, the index did close below the recent and decent daily close support between 1068 and 1071, thus giving the index a second sell signal of consequence, on the daily chart, if confirmed on Monday with another red close.

On a weekly closing basis, resistance is minor at 1088, decent between 1136 and 1145, and strong up at 1217. On a daily closing basis, resistance is minor at 1088 and very strong at 1103. Above that level resistance is decent at 1110, strong at 1150 and again at the high daily close, seen 3 weeks ago at 1172. On a weekly closing basis, minor support is now found at 1136 and decent support at 1025 from a minor weekly close as well as from the 100-week MA. On a daily closing basis, minor to decent support is found at 1036, decent support is found at 1025 and decent to strong support at 994.

The close on Friday left a few questions still unanswered on the SPX chart. The weekly close was only 1 point below support and that is not enough of a margin to say the support level has been broken. The daily close was below support at 1168/1171 and by enough of a margin to say the support has been broken, but close enough that a green close on Monday could negate the break. By the same token, if the break of daily close support is confirmed with another red close on Monday, a second sell signal of consequence will be given.

Nonetheless, it must be mentioned that the SPX does show an array of minor supports every 10 points down from Friday's close that will likely act as a brake on the way down, likely preventing the kind of drop that was seen on Friday.

One ominous sign, though, is the double top that was formed at the 200-day MA at 1103. That resistance is now likely to prevent strong buying from occurring and likely make the resistance at 1088/1090 into the best possible upside objective on any rallies that could occur, if seen.

Based on the chart evaluation of the other indexes as well as on SPX, and the overall downside objectives expected to be seen this week, it is likely the index will drop down to the 1120-1130 level this coming week.

The probabilities have now increased that the indexes are in a downtrend, though none of the indexes has confirmed that fact yet and in 2 cases (SPX and NASDAQ) that has not even been stated. By the same token, all indexes are at critical levels and with the recent negative fundamentals news it is a high probability it will occur this week as further downside is expected.

There is little in the way of economic news this week that could be of help to the bulls but there are several ongoing events that are on the verge of exploding (Europe's financial ills) that could not only tip the scales negatively but perhaps even create a bit of a panic selling situation. As such, the possibility of a rally being seen this week is low.

By the same token, both the DOW and the NASDAQ are at levels of strong psychological impact and it will be difficult to generate a strong break of those levels unless the traders feel that the news will continue to be negative. That will be difficult to assume as the next earnings quarter starts in 3 weeks and already traders are thinking the earnings good news seen over the last 3 quarters will continue to be seen in the new quarter. As such, breaks "much below" the psychological levels mentioned, will be difficult to accomplish.