DOW Friday closing price - 9686

The DOW generated a second sell signal on the weekly closing chart this past week closing below the previous low close at 9932. In addition, it also confirmed that the previous week's high at 10594 was in effect a successful retest of the 14-month rally top that started at 6470 on March 9th 2009 and ended at 11250 on April 26th 2010. It is now likely that the index is on a downtrend looking for levels where support will be found.

The economic news this past week continued to come out worse than expected with Unemployment being the key issue. The week started with China's Unemployment number being much higher than expected and ended with the U.S. unemployment also showing signs that the recovery has been stunted. In between, news that Manufacturing has slowed below what the market had been expecting generated additional fears that growth has once again begun to shrink and that a Double Dip recession could be coming into view.

On a weekly closing basis, minor to decent resistance is now found at the psychological 10,000 level. Above that level, resistance is now strong at 10451, decent at 10618 and strong again at 11204. On a daily closing basis, resistance is psychologically decent at the demilitarized zone between 9970/10030, minor at 10081/10093, and decent at 10255. Above that level, there is minor resistance at 10360 and strong at 10451. On a weekly closing basis, support is minor to decent between 10488 and 10495 (previous minor weekly close at 10488 and at the 100-week MA, currently at 9495). Below that level, there is minor psychological support at 9000 and then nothing until minor support is found at 8379. On a daily closing basis, support is decent at 9488, and then minor at 9135 and decent again at 9015.

The DOW finds itself in a very precarious position as the only previous chart support level of any consequence is between 9488 and 9495 and that support is no better than simply decent. The index did close on Friday within an often used (but not dependable) psychological support area found 300 points below an even number such as 10,000 is (closed at 9686). Nonetheless, with no reason to think that new or aggressive buying will be coming in next week, the probabilities of that area holding up, at least on an intra-week basis, are low.

On the other hand, though the 10,000 level will now be considered decent resistance it will also be considered a strong psychological magnet. With the DOW seeing trading ranges the last 2 weeks in excess of 500 points, it would not be surprising to see a 9495 to 10030 trading range this coming week. This is especially probable since no economic news of consequence pushing the index down is expected to be seen this week, as well as the fact the earnings reports the following week are still expected to be positive. As such, traders are likely to "trade the range" between support and resistance this week. Having closed near the lows of the week, though, the first move is likely to be down on Tuesday.

It is important to note that even though the economic news was negative on Friday (Non-farm payroll and Factory Orders worse than expected) the low was only 8 points below Thursday's low. Such action can be seen as a sign that some buying is coming in at these lower levels and that the bears will have trouble generating much lower numbers until new economic or earnings reports come out. None of consequence are expected this week.

NASDAQ Friday closing price - 2091

The NASDAQ gave a sell signal this past week closing below the 200-week MA, as well as below the strong weekly close support level at 2141. The sell signal came in a dramatic fashion inasmuch as it was accomplished with strong spike down action as well as a close near the lows of the week. The close on Friday leaves little doubt that the break of support will be confirmed as it is unlikely the index could rally sufficiently this coming week to negate the break.

It is expected that the NASDAQ will see follow through to the downside as there is no intra-week support of consequence until the 2000 level is reached. Having closed on Friday at 2091 it is entirely possible (maybe even probable) that this index will show more weakness than any of the others as the other indexes do show support levels of consequence closer that the ones seen in the NASDAQ

On a weekly closing basis, decent to strong resistance will now be found at the 200-week MA, currently at 2218. Above that level, resistance is strong between 2310 and 2317. On a daily closing basis, there is minor resistance at 2176, decent at 2204, and decent again at the 200-day MA, currently at 2255. On a weekly closing basis, support is minor at 2065, decent at 2045, and decent to strong at 2020. Below that level resistance is decent at the 100-week MA, currently at 1970. On a daily closing basis, support is decent between 2045 and 2048, minor at 1970 and decent again at 1931.

For the previous 8 weeks the NASDAQ, on a weekly closing basis, had been able to hold itself above the 200-week MA without breaking through it. Nonetheless, that support level was convincingly broken this past week when the stock closed 130 points below the line. In addition, the index has built a Head & Shoulders formation on the intra-week chart that was also broken this past week when the stock broke below the neckline at 2141. The objective of the H&S formation is 1952.

It must also be mentioned that when the NASDAQ found its high 10 weeks ago at 2535, the index dropped 349 points in a period of 2 weeks. The index reached its recent upward correction high 2 weeks ago at 2341 and if the index drops the same amount as seen on the first drop (now very likely), it will get down to 1992. As such, the probabilities of the index dropping 100 points this coming week have to be considered good.

Nonetheless, on a weekly closing basis, the index has good support from a small double bottom low on the weekly closing chart at 2045 made back in Sep/Dec 2009 as well as an important low close at 2020 seen in July 2006. In addition, the 2000 level has to be considered strong psychological support. As such, even though the index may see the lower levels mentioned above, the probabilities do not favor a close below 2020 to 2045 this coming Friday. The NASDAQ was the leader to the upside, outperforming the other indexes during the last 15 months. It is now entirely probable that if a downtrend has begun that it will outperform the other indexes to the downside, possibly even generating a red close next Friday while the other indexes generate a green close.

Resistance this week will be strong at 2141 (neckline that was broken this week), so rallies will likely be very limited. Possible trading range based on last week's trading range of 182 points might be 1992 to 2141.

SPX Friday closing price - 1022

Unlike the other indexes, the SPX reached the 100-week MA (currently at 1014) this past week. Due to the continuing financial problems besetting the world's banking institutions the index has shown the most weakness during the past 3 months and that trend is at risk of continuing as many of the major financial stocks in the SPX, such as GS, MS, JPM, and WFC broke important supports levels this past week.

The SPX does have major psychological support at 1000 so it is unlikely that much further downside action will be seen this coming week, mainly due to the lack of economic reports coming out. By the same token many of the important financial stocks in the index have broken strong supports and need "positive" fundamental news to reverse the break. Positive news in that area is hard to find.

On a weekly closing basis, resistance will be decent at 1065/1068, minor at 1088, and decent to strong at 1118. Above that level, strong resistance is found at 1145 and major at 1217. On a daily closing basis, resistance is minor to decent at 1050, minor at 1077, strong at 1103 and very strong at 1118. On a weekly closing basis, decent support is found at 1014, minor at 1000, and minor again at 946. Below that level, there is no support until strong support is found at 876/879. On a daily closing basis, support is minor to decent between 994 and 1006, minor again at 979, and strong down at 879.

The 100-week MA has to be considered a strong support line in any stock or index and therefore without any new developments expected to come out this week, it is likely the SPX will hold itself above that line, on a weekly closing basis, for at least one more week. By the same token, the index has built a Head & Shoulders formation and the neckline was broken this past week when the index closed below 1065, giving an objective of 966. As such, it is possible to see rallies up to 1065 if the bulls are able to generate any buying this week, but the downside continues to be the most probable direction.

It must be mentioned that supports close below the psychological support at 1000 are mainly minor in nature until strong support is found at 876. As such, the bulls have to be worried that a break of the psychological support will bring in heavy selling. The index is therefore at risk every day of negative news coming week, which will prevent any strong buying from occurring at this time.

The probabilities favor some further downside at the beginning of the week with 991 as a possible objective. The 991 level was the first intra-week low made after the index broke above 1000 in August of last year. In a week where there is little news to push the indexes down aggressively, such a low could easily hold and generate a rally thereafter. On the upside, the weekly close neckline of the H&S formation at 1065 has to be considered strong resistance. Nonetheless, on an intra-week basis, the neckline broken was actually at 1041, and therefore strong selling should appear if the index moves up to that level, which is likely to happen. Possible trading range for this coming week is 991 to 1041.

It is clearly evident by the sell signals given this past week that rallies of consequence will now be sold aggressively until such a time that fundamental news says otherwise. By the same token, the next quarter earnings reports start coming out on July 12th and they are still expected to show companies generating profits. As such, the bears will likely be cautious this coming week, not taking many risks and even allowing the bulls to rally the indexes up to the breakdown levels, as a possible successful retest of the support levels broken.

Since there are no economic reports of consequence this week, trading will likely all be done based on charts and technical indicators with traders buying support and selling resistance. Such levels are clearly explained for each index up above.

With the indexes closing near the lows of the week, the probabilities favor further downside on Tuesday, and perhaps Wednesday in order to get down to the support levels in question. By the same token, if those support levels hold (likely this week), there will be some short-covering in anticipation that earnings reports will continue to be positive as they have been during the last 3 quarters.