DOW Friday closing price - 10193

With a strong sell off, a spike-type drop, and substantially lower close, the DOW confirmed this past week that a mid to long term top has been accomplished. The action was based mostly on fears that the European nations are facing strong financial problems as well as a devaluation of the Euro because of the need to prop up Greece's default scenario. Nonetheless, the drop was not only fundamental but technical in nature as well, as confirmation of a top brought in a strong bout of profit taking after a 14-month bull run to the upside.

Up until Friday's close, there were strong fears circulating throughout the week that another collapse of the financial markets, such as the one seen in 2008, might be occurring. Nonetheless, with the DOW holding above the computer-selling glitch low seen 2 weeks ago, as well as closing above the major psychological support at 10,000, many of those fears were assuaged, showing that the action was as much technical as fundamental.

On a weekly closing basis, the previous weekly closing high at 10620 will now be strong resistance. Above that level, there is no resistance until the 18-month weekly closing high at 11204 is reached. On a daily closing basis, resistance is decent at 10297 (previous daily high close as well as 200-day MA), and decent again at 10500 (psychological as well as previous daily close resistance from Nov/Dec). Above that level, there is decent resistance at 10725. On a weekly closing basis, support is strong at 10012, and then nothing until the 100-week MA, currently at 9560 is reached. On a daily closing basis, support is decent at 9908. Below that, only minor supports are found at 9713, 9488, 9281, and 9135.

It can now be said with a measure of confidence that the up-trend has come to a halt and that a correction phase of consequence or a downtrend has begun. The now confirmed break of the 200-day MA, currently at 10265, will cause technical traders to sell rallies until such a time that positive trend-changing fundamental news comes out, or a bottom to the correction is built. Building a bottom is not something that can be done in a short period of time and the financial problems in Europe are not such that will go away in a fast manner either. As such, the DOW is now likely to have a negative bias but with the "normal" peaks and valleys type of trading.

The 10,000 level in the DOW is a major psychological pivot point that is likely to act as a magnet (for both the bulls and the bears) until more fundamental news comes out. Nonetheless, the probabilities at this time slightly favor the downside as fear of Europe's problems will continue to abound, as well as profit taking being seen on any rallies. As such, it is likely that for the next few weeks the index will be trading more below 10,000 than above it.

Friday's late bounce and green close, after testing the 9870 low seen on computer-glitch day (got down Friday to 9917), should generate a bit of buying at the beginning of the week, if and when the situation in Europe has not gotten worse. The main chart concern for the bulls at this time has to be the 200-day MA (currently at 10265) that was broken this past week. As such, the probabilities favor a rally back up to test that level at the beginning of the week. Where the index closes on that rally will likely determine what the index will do for the next couple of weeks and/or if the index is in a downtrend or a sideways trend.

If the DOW is unable to close above the line and confirm that close with a second close in a row, the bears will swarm back to sell the index, likely causing a drop down to at least the 9700 level, if not down to the 100-week MA currently down at 9560. If the bulls are able to negate the break of the line, rallies up to 10500-10600 will likely occur and the index will likely trade sideways for the next week or two between 9970 and 10500/10600.

One thing for sure, rallies will be tentative and volatility will likely continue to be high. Nonetheless, without any new negative news, the probability slightly favors the upside this coming week, with the 200-day MA being a pivot point. Possible trading range for the DOW this coming week is 9970 to 10500.

NASDAQ Friday closing price - 2229

The NASDAQ received strong selling this past week breaking below the computer-glitch low of 2 weeks ago at 2186 (got down to 2166), as well as below the 200-week MA, currently at 2216. Nonetheless, when all the shouting was done, the index managed to close above the 200-week MA leaving questions about the long-term trend unanswered.

The NASDAQ closed within a level of weekly close support between 2212 and 2239 that was in effect back in 2008 when the all the indexes were giving signs that a big drop was coming. Nonetheless, tt is important to note that from this support level the index generated 2 rallies of consequence prior to the major drop. As such, the index is likely to continue to be the main indicator for what is to happen.

On a weekly closing basis, minor to decent resistance is found at 2317 and again at 2347. Above that level decent to strong resistance is found at 2453 and major at 2530. On a daily closing basis, decent to strong resistance is now found at 2320/2330, strong resistance is found at 2425, and major resistance is at 2530. On a weekly closing basis, support is decent at 2212 and strong at 2141. Below that level there support is decent at 2045 and then nothing until the 100-week MA currently at 1975. On a daily closing basis, support is minor to decent at 200-day MA, currently at 2220, and then nothing of consequence until decent to strong support is found at 2126.

Once again the NASDAQ is likely to be the index to follow for chart clues as to what the market is going to do for the next few weeks. Unlike the DOW and the SPX, the NASDAQ is still showing the uptrend intact, having closed above the 200-day and 200-week MA's on Friday. Having been the index that led the rally last year, it is important to note that the support levels held suggesting that the fundamental problems facing Europe are not necessarily back-breaking "at this time". Such action could mean that the indexes are in a sideways trading range rather than in a downtrend, as some of the action in the other indexes seems to suggest.

Nonetheless, it is just as evident in the NASDAQ (if not more so because of the major double top built at 2529/2530) that a long-term top has been established. Nonetheless, in going back to 2008 prior to the major drop in price, the index traded between 2200 and 2500 for a period of 6 months before the index collapsed. Based on the action Friday, it is entirely possible the same thing could be seen this time around.

It is also important to note that in 2008 the lows made in March and then again in September were 2155 and 2167 respectively. With the NASDAQ having gotten to 2166 on Friday, it is safe to assume that if that low is not broken this week that the intra-week support from that time has held and that a rally will occur. In March 2008, after the 2155 low was made, the index rallied up to 2551 during the next 8 weeks, the index then fell down to 2166 and subsequently generated a rally up to 2473. As such, the 2155/2166 area will be highly pivotal and important this coming week.

Based on the chart information stated above, the probabilities favor an inside week this week. There is decent resistance from January at 2326 and there should be decent support at the 200-week MA, currently at 2216 as well as the low seen 2 weeks ago at 2186.

There is one big negative to the chart in the fact that the index gapped down a week ago Friday from 2388 to 2375 and followed that gap with a second gap on Friday between 2271 and 2253. Such an event could be a breakaway/runaway gap formation that would be strongly bearish. As such, the recent gap will be closely monitored by the traders trying to use that information to determine what is happening. If the runaway gap is closed, then the breakaway gap is likely to be closed and that would mean the index would be back up to the 2400 level and likely heading up to test the resistance from 2008 at 2453. In addition, the traders are also likely to be monitoring the 200-day MA, currently at 2220, as a daily close below that line would weaken the chart.

As you can see by the information mentioned above, the NASDAQ is likely to be a big key to what the indexes do for the next few weeks.

SPX Friday closing price - 1088

The SPX broke down this past week and traded below the computer-glitch low generated 2 weeks ago at 1066 with a drop down to 1056. Nonetheless, the break did not generate any new selling and in the end the index was able to close on Friday above an important weekly close support at 1066. The index did close below the 200-day MA on both Thursday and Friday suggesting that the up-trend has been broken and that a downtrend may have begun.

The SPX is the most sensitive index to the problems being faced in Europe and therefore a good indicator for how serious that problem actually is. Based on the late rally Friday and close above the strong weekly close support at 1066, it suggests the problems are worrisome to the market but not necessarily that negative at this time.

On a weekly closing basis, resistance is minor at 1137 and a bit stronger at 1145. Above that level, there is no resistance until 1217 is reached. On a daily closing basis, resistance is strong between 1100 and 1110. Above that level resistance is strong at 1150 and again at the high daily close, seen this past week, at 1172. Above that level there is no resistance of consequence until 1200-1217 is reached. On a weekly closing basis, support is strong at 1066 and strong again at 1040/1045. Below that level, support will be found at the 100-week MA at 1030. On a daily closing basis, support is minor at 1072 and decent at 1057. Below that level, decent support is found at 1136, at 1125, and at 994.

The SPX broke and confirmed the break with a second close in a row of the 200-day MA, currently at 1102. As such, the first course of action for the bulls is to try to negate that break by rallying the index to close above the line. This is actually going to be a tough thing to do because there is a mountain of previous daily close resistance between 1100 and 1110. As such, getting the index to close above that level is likely to take some positive fundamental news to accomplish it. It is probable, though; that the European community will confirm this weekend the $1 trillion dollars to help the nations in problems. If that happens, the relief could be enough to generate a strong move up this coming week.

The SPX does show very clear parameters that will help determine its short-term fate. On a weekly closing basis, support is strong at 1066 and resistance is strong at 1145. On a daily closing basis, the 200-day MA at 1102 is likely to be an important pivot point for the index. As such, using these numbers will make it easy for the traders to take a short-term direction. Probabilities seem to favor the upside slightly if for no other reason than the European Financial Community was likely to confirm the $1 trillion dollar aid package this weekend. In addition, the ability of the index to close above the 1066 level on Friday, though it traded below that level intra-day, suggests that the worst fears experienced this week have been assuaged.

Possible trading range for the week could be 1066 to 1119.

A top has been established but has a downtrend begun? Is there still enough bullish feelings left to generate a weekly retest of the recent highs? Are the problems in Europe actually a back-breaker or simply another economic anchor to the financial community? These are the questions likely to be swirling around this coming week.

Some of the immediate questions are likely to be answered before Monday's trading as it is probable that the European financial community will have confirmed the $1 trillion dollar loan package by Sunday night. As such, that is likely to be an important factor affecting the trading this coming week. Nonetheless, what is not clear is how much, if any, will that affect the market positively.

One thing for sure, volatility will continue to be high and trading ranges wide. In both the DOW and the SPX, the 200-day MA will be an important factor and in the NAZ the recent runaway gap will be the contentious level. If the lows made on Friday get taken out, further downside will likely be seen. Probabilities favor the upside slightly this week as the drops in price have been substantial. Nonetheless, fear remains an unchartable factor as of this writing.