DOW Friday closing price - 10097

After 7 trading days in a row of upward movement as well as a 794 point gain, the DOW ended up closing the week below last week's close and on a bearish note. The bulls were unable to trigger any kind of buy signal in spite of having control of the market for most of the last 2 weeks and creating what at times seemed like impressive momentum. Nonetheless, the week ended up with a spike low, a close on the lows of the week, as well as another close below the 50-week MA.

The bulls were hoping that the expected earnings reports quarter would continue to show a positive pattern of better than expected earnings and that those results would stimulate new buying. The earnings have so far been better than expected but revenues have fallen a bit short of expectations and that has not been sufficient to generate any new buying. In fact, the volume the past 2 weeks has been the lowest seen since the Xmas to New Years week, suggesting that the rally was not supported strongly to begin with.

On a weekly closing basis, resistance is now decent at 10198 and decent to strong at 10451. Above that level, resistance is decent at 10618 and strong at 11204. On a daily closing basis, resistance is minor to decent at 10255/10259 and now decent to strong at 10363, as well as strong at 10451. On a weekly closing basis, support is minor at 10012, minor again at 9932 and decent at 9686. Below that level support is decent to strong between 9488 and 9495 (previous minor weekly close at 10488 and at the 100-week MA, currently at 9495). On a daily closing basis, support is minor at 9974, minor to decent at 9816, and decent to strong at 9686.

On Friday, the DOW experienced strong selling from the start even though the earnings on C, BAC, and GE came in slightly better than expected. Nonetheless, Thursday night the report on GOOG was negative and that seemed to take precedence. The index was due to open slightly higher but failed to do so and selling was evident from the onset. Various minor support levels were broken during the day and it wasn't until the SPX reached a weekly closing support of some consequence down at 1066 that some of the selling dried up. Nonetheless, it is important to note that contrary to the previous 8 days of trading where the index rallied but the volume was very low, Friday's drop in price generated the 9th highest volume day since the beginning of the year (over 140 trading days). That has to be considered both bearish and indicative.

It is therefore evident that selling interest is back in force and having closed near the lows of the day and the week, follow through to the downside is expected to be seen this coming week. There are no economic reports of consequence due out this week and though a very high number of earnings reports are due to come out, it now seems that more than simply better-than-expected earnings reports are needed to stop the downtrend that is likely back in place.

The DOW is likely to find some daily and weekly close chart support around the 10,000 level if the earnings reports continue to be positive. On a daily closing basis, there is decent support at 9974 and again at 9908, and on the weekly closing chart support is found at 10012 and at 9932. These support levels, as well as the strong psychological support nature of the 10,000 level, are likely to slow down or perhaps even stop the kind of selling that was seen on Friday. Nonetheless, on an intra-week basis, there is no support of consequence until 9870 is reached, Even then, that support is not considered the strongest and intra-week drops down to the 9758/9774 could be seen. At that level support is considered to be strong enough to stop any further weakness, if and when no negative reports or news of consequence come out.

With so many earnings reports still due out over the next 2 weeks, it is unlikely that the DOW will break down completely as any one day could bring a positive surprise of consequence. Under those conditions, the traders are likely to approach the market a bit gingerly, but with a slight negative bias. Nonetheless, it must be mentioned that the 2 weeks prior to last week's rally, the 50-week MA was the intra-week high of the DOW and with the negative action seen at the end of this week, it is once again likely that MA, currently at 10220, will stop any rally attempts. Having had a 328 point range this past week, using a possible high of 10220, it would suggest the index could see a low of 9892. Nonetheless, it must be mentioned that the previous 2 weeks the trading ranges were in excess of 500 points and therefore using the same 10220 level as the potential high for the week, drops down to as low as 9700 could be seen. This is all likely entirely dependant on how the earnings reports come out.

Having closed only 18 points from the low on Friday, as well as the fact that the earnings reports on Monday are not that important, I would expect Monday to be a day with a lot of selling pressure, and even perhaps the worst day of the week. It is likely the index will see at least the demilitarized zone (9970-10030) on Monday, but drops down as low as the high 9800's or the low 9900's could be seen based on the fact the index had a 276 drop on Friday. Using a potential "Monday" high of 10115, that could cause the index to drop as low as 9836 on Monday.

The DOW will be totally dependant on reports this week, at least as far as the upside is concerned. The bears are likely to be generally in control and the burden of proof will be on the shoulders of the bulls. There is little the bulls can draw from on Monday, unless some positive economic news is released overseas over the weekend.

NASDAQ Friday closing price - 2179

Once again the NASDAQ took center stage this past week due to the importance of the 200-week MA, currently at 2222, as an indicator of the health, or lack thereof, of the market. The bulls took advantage of the action seen 2 weeks ago when the index made a new 7-month low but failed to follow through. Such failure gave the bulls the ammunition to sling-shot the index higher and break above, at least on an intra-week basis, the 200-week MA that had been broken 4 weeks prior. Nonetheless, the index was only able to get up to the 200-day MA, currently at 2253 and no further. Having stopped at that line on Tuesday and again on Wednesday, disappointment followed causing the index to drop and close below the 200-week MA on Friday, giving further confirmation that the line has been broken and that the uptrend is over.

The NASDAQ has now closed 3 weeks in a row below the 200-week MA and the fact the index closed lower on Friday than the previous week, makes the previous week's close at 2196 into a successful retest of the break of the line, Such action should generate stronger technical selling from here forward, and indicating that a downtrend is now in place.

On a weekly closing basis, minor to decent resistance is now found at 2196. Further resistance is found at the 50-week MA, currently at 2210, and decent to strong resistance will now be found at the 200-week MA, currently at 2222. Above that level, resistance is strong between 2310 and 2317. On a daily closing basis, there is decent resistance at 2204 and strong resistance at 2250. Above that level there no resistance until strong resistance if found between 2303 and 2310. On a weekly closing basis, support is decent to strong at 2141 and strong at 2092. Below that level resistance is decent at the 100-week MA, currently at 1970. On a daily closing basis, support is minor to decent at 2159, very minor at 2126, and strong at 2092. Below that, resistance is strong between 2045 and 2048, minor at 1970 and decent again at 1931.

The action this past week was highly indicative that without some major fundamental positive news, that the NASDAQ has now broken the uptrend and is likely to be in a short to mid term downtrend of consequence. Both the 200-week and 200-day MA's were tested successfully this past week and the bulls now face resistance levels that the bears can rely on to sell against. Such a scenario insures that rallies will be met with strong technical selling, giving a strong upper hand to the bears.

Having closed once again below the previously strong 2200 level, the 2000 level now becomes a psychological magnet of consequence. The 2000 level has proven to be a major pivot point since 2001 and now that the index has proven that the uptrend is broken that pivot point level is likely to draw the traders like flies to honey.

On a shorter term basis, though, the NASDAQ shows very decent support at 2139/2141. Drops down to that level are likely to be seen on Monday, with a potential high of 2191. Nonetheless, as the week progresses and the earnings news comes out, the possible trading range can get expanded to 2100 on the downside (major low seen in February) or even up to 2222 (the 200-week MA). Nonetheless, it must be mentioned that the probabilities favor the bears and if there are any surprises, they likely will favor the downside.

It is now highly unlikely the NASDAQ will get above the 200-week MA at 2222 anymore. Last week's trading range was 82 points and using that level as a potential high, the 2141 level would be seen as the low. By the same token, it is also somewhat unlikely that 2222 will be seen and that 2191 will be the week's high, as such the 2100 level would then come into play. Nonetheless, it must also be mentioned that the 2 weeks prior to last week, the trading ranges were 181 and 121 points and if the index goes back to that kind of trading range, it is certainly possible to visualize the index seeing the 2000 to 2061 level this week.

SPX Friday closing price - 1065

The SPX once again proved the be the weak sister of the indexes failing to get anywhere close to the 200-day MA, which the other 2 indexes did, as well as failing to get above the 50-week MA, which the other indexes were able to do intra-week. As such, in looking at the SPX chart, it suggests that the market is possibly in more trouble than thought otherwise.

It also must be mentioned that one of the big financial stocks in the SPX is Goldman Sachs and that stock was able to generate a decent rally on Friday after the company resolved its issue with the SEC on Thursday. In addition, the earnings reports for 3 other highly traded financial stocks in the index also received positive earnings reports this past week, and yet none of that was helpful to the index having closed with more of a percentage drop than either of the other 2 indexes. Such action suggests that upside movement will be very difficult to generate.

On a weekly closing basis, resistance is decent at 1078 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 decent at 1096, strong at 1003 and very strong at 1118. On a weekly closing basis, decent support is found at 1065/1066 and strong support at 1023. Below that level there is decent support at 1014 (100-week MA) and decent to strong at 1000 (psychological support). Below that level there is minor support 946 and the no support until strong support is found at 876/879. On a daily closing basis, support is minor decent at 1050 and strong at 1023. Below that, there is decent support between 994 and 1006, minor again at 979, and strong down at 879.

The SPX failed to generate the kind of a rally over the past 2 weeks that would give fuel to the idea that further upside was possible. In addition, the index failed to close above the late May/early June high daily closes, unlike what the DOW was able to do, and that simply emphasizes the problems that the financial industry is experiencing. It is highly unlikely that without a recovery in the financial community that any kind of a lasting rally in the market could occur.

The SPX was able to hold itself above a decently important daily and weekly close support between 1065/1066 on Friday. By the same token if there is any follow through on Monday (likely) that support level will get broken and increase the probabilities of the index dropping down to the 1000 level. As it is, being so close to the psychological level at 1000, it seems very likely that the simple magnetism of the level will draw the index down to it. By the same token, if the index does get down to 1000, it will find that the support there is "only" psychological as below the 100-week MA, currently at 1010, there is no previous support of consequence until 879 is reached.

With 3 financial earnings reports already out this past week, and most of the other important financial ones due out this coming week (GS on Tuesday, MS, WFC, and USB on Wednesday), it is evident that this is a major pivotal week for the SPX. Having seen a negative reaction to the financial earnings this past week, it is anticipated the reaction to this comings week's reports will be the same, and if that happens, strong selling pressure will continue to be seen in the index.

The red close on Friday suggests that the recent low weekly close at 1023 will be broken this coming week and that a close at the 100-week MA, currently at 1010, will be seen next Friday. Nonetheless, there is very decent support intra-week between 1041 and 1045 and though it is likely that level will be seen as early as Monday, it is also not likely to get broken until the earnings reports are all out on Wednesday morning. That level will certainly be a major pivot point this week and worth keeping a close eye on. To the upside, unlike the other indexes, there is no close-by level of resistance that is all that important. As such, keeping tabs on the resistance levels of the other indexes will be necessary. One thing is evident, though, this is a critical week for the SPX. Probabilities favor the downside.

The last 2 weeks were considered to be "trading range technical playgrounds to the upside" due to the lack of important news coming out as well as the lack of nearby resistance levels of consequence. Nonetheless, that has now changed as the resistance levels of consequence have been reached, tested successfully, and the earnings report quarter is upon us. News is once again of great importance.

Having gotten rid of the oversold condition that was present in the indexes prior to last week's rally, the index market is now set up to react technically, in either direction, to the news that comes out this week. Nonetheless and on a bearish note, it must be mentioned that earnings were "expected" to be positive and after a 796 point rally in the DOW based on that anticipation, much of the good news has already been factored in. It is now likely necessary that the reports be "substantially better than anticipated" in order to generate any further upside of consequence.

The negative action seen on Friday is likely a sign that the bias is toward the bear side and that the burden of proof is on the shoulders of the bulls. Other than earnings reports, there is general dearth of economic news due out this week. Nonetheless, the housing industry will be in the limelight this week with Housing Starts, Building Permits, and Existing Home Sales hogging the economic calendar. That area of the economy is still expected to continue dropping.