DOW Friday close at 8579

The DOW continues to trade, on a short-term basis, without any clear direction. For the past 3 weeks in a row, the index has closed within a 60 points range and without any clear indication of what to expect the following week. This week, though, on an intra-day as well as daily closing basis, the DOW had a successful re-test of the recent high at 9029. Such a successful re-test likely signals that further upside is going to be difficult to accomplish. It seems evident that without any new positive fundamental news, the bulls will have a tough time generating enough new buying to break the established resistance levels above.

Nonetheless, the close on Friday still leaves the door open for upside movement, as the sellers themselves seem to be unable to generate new and aggressive selling as well.

It is important to note, though, that the low made 5 weeks ago at 7449 still has not had a re-test on the weekly chart. Having a market that is fundamentally weak and that has been in a strong downtrend this year, continues to pose problems to the bulls. It is unlikely that the index will be able to generate any kind of a lasting rally without a successful re-test of the lows. As such, the probabilities continue to favor movement to the downside over the short-term.

On a weekly closing basis, there is some minor support at 8379 and strong support at 8049. Below that level there is no weekly closing support until 7528 is reached. Below that level you have to go back to 1997 and a weekly closing low at 7442 that was considered important at the time. On a daily closing basis, there is now very strong support at 8149/8176 and minor supports at 8283, 8376, and 8451. In addition, with this week's action, there is now decent support at 8565. Major support is down at 7552. On a weekly closing basis, resistance is strong at 8852 (recent weekly high close) and up to 8896 (double top on the weekly closing chart from 2002) On a daily closing basis, resistance is strong up at 8934 from this week's high close and now double top. There will also be strong resistance from two previous closes at that 8852. Above that level, the 9000 level will be strong psychological resistance.

The DOW had an inside day on Friday with higher lows and lower highs than the previous day. In addition, the index failed to get substantially above Wednesday's low of 8778, from which the index broke down from on Thursday. The inside day and failure to rally above Wednesday's low is a negative sign that will likely cause the index to fall on Monday. Friday's action was difficult to gauge, as it was a quadruple witching day with option and futures expiring and therefore such a day needs to be overlooked.

A drop on Monday, below Thursday's low of 8527, will be seen as short-term bearish and likely generate a move down to at least the 8119/8144 level where strong support is found. Nonetheless, the weekly chart seems to show that a drop down to the 7965, or even down to the original low made on October 10th at 7883 is not only possible but probable. Such a drop would fulfill the requirements for a re-test of the lows on the weekly chart.

With next week being Christmas, the market will likely have very low volume and might be prone to manipulation by the traders. With the upside being difficult, the traders might find the downside more appealing on such a holiday week. It is then likely that either the market will be trading sideways or down, as the upside will be difficult to achieve.

Keep a close eye on the 8700 level, as that is where the 50-day MA is currently located. If the index is able to get above that level, it is possible the upside will be explored. Possible trading range for next week is 8700 to 8048.

NASDAQ Friday Close at 1564

The NASDAQ was able to close higher this week than the previous week thus maintaining the fact that the stocks that comprise this index were the hardest hit during the collapse in the market and are now simply "catching up". Nonetheless, the index maintained itself below a strong resistance level at 1600 this past week and was not able to close substantially higher than an important previous low weekly close at 1552. In addition, the index did have a successful re-test of the previous high of 1603 with a high of 1598 this past week.

Like with the other indexes, the NASDAQ has not had a re-test of the lows and for the past 4 weeks, the low of the week has consistently been higher than the previous week. This past week the index failed to get above the previous week's high, possibly signaling that a short-term top has been found.

It is important to note, though, that the daily chart is not showing any kind of a bearish pattern at this time and does show a triple top on the intra-day chart at 1597/1603. Triple tops do not generally hold and the probabilities of breaking above that level are high. The question is whether it will occur first, or after a correction back down below the 1500 level.

On a weekly closing basis, support is minor at 1509 and strong at 1384 (5-year low weekly close). On a daily closing basis, support is minor at 1552, strong between 1499 and 1508, minor at 1446 and strong again at 1398. Major support is found at 1316. On an intra-day basis, minor support will be found at 1535, and then again at 1478. On a weekly closing basis, strong resistance is up at 1721. On a daily closing basis, strong resistance if found at 1590/1597 (most recent daily high close and 50-day MA) and decent at 1565. Above 1597 there is no resistance until 1786 is reached.

On an intra-day basis, the NASDAQ has been straddling the 50-day MA during the last three trading days but on a daily closing basis the index has been unable to break above it. The daily chart seems to be leaning toward upward movement and with a holiday week ahead and lower volume and participation, if the traders decide to push higher, the index could roll to the upside by 200 points. It is likely, though that Monday's trading will determine whether the index is heading higher or lower for the next week or two. A break above 1600 will be short-term bullish, while a break below 1535 will the short-term bearish.

There are several underlying currents that should play out over the next 5 weeks. The NASDAQ stocks have been pummeled over the past 3 months and now that the market seems to have paused its downtrend, this particular and oversold index could show a strong rally first. Nonetheless, the index also shows that a re-test of the lows is needed and perhaps overdue. It is a tough call as to what will happen first.

S&Poors 500 Friday close at 887

Like with the other indexes, the SPX closed out the week without any kind of new direction. The index, on a weekly closing basis, seems to have been pivoting around the 876 level for the past 8 weeks. Nonetheless this past week the index was able to close a bit higher, though not high enough (above 909), to give any fuel of consequence to the bulls. This likely means the index is basically directionless for the time being.

Nonetheless, there was one event during the week that could spell out the direction of the index. On Tuesday, the index generated a close above all the strong resistance between 899 and 909 with a close at 914 and above the 50-day MA. Such a close should have generated further upside but instead the index went back down and gave a failure-to-follow-through signal that has put the index back into a defensive mode. On the positive side, though, the daily closing support at 868 held up during the rest of the week and left the index in a wait-and-see-what-happens-next-week mode.

On a weekly closing basis, support is now very strong at 800 and minor at 876. On a daily closing basis, support is strong at 816 and at 848/852. Nonetheless, this week decent support was also built at 868. Major support is at 752. On an intra-day basis, support is now very strong at 816, decent at 848-851 and minor at 877. On a weekly closing basis, resistance is very strong between 930 and 940 from two weekly closing highs in 2002 at 928/930 as well as a recent weekly closing high at 940. Above that level, resistance will also be strong at 968 from the most recent high weekly close. On a daily closing basis, resistance is now very strong between 909 and 914, from the most recent previous daily closing highs. Some resistance will also be found at 898 from a previous daily closing low as well as the 50-day MA. Resistance is major at 998-1003.

Like with the other indexes, the SPX finds itself in no-man's land waiting for a new catalyst to generate direction. It is possible that the quadruple option and futures expiration day was a catalyst that prevented a drop in price on Friday as the weakness seen on Thursday should have generated follow through to the downside. Nonetheless, whether that is what prevented further weakness on Friday won't be known until the index starts trading on Monday.

On a daily closing basis, the parameters for further movement are now quite clear with 914 on the upside and 868 on the downside. A close above or below either of those two levels will likely generate follow through in that direction. At this time, it is almost a flip of a coin.

Though there are a few small signs that tilt the indexes toward lower prices, the reality is that there aren't enough of them, or of sufficient strength to determine with any good amount of probability the direction of the market for the next week. With this week and next being holiday weeks, it is just as possible that nothing will happen as if something will.

It is therefore necessary to remember that even though there is great hope that the new Obama administration will come up with concrete and positive solutions to the problems facing it, the marketplace is still in a bear trend and that the fundamentals continue to be very negative. It is still easier to be an aggressive seller than an aggressive buyer. Nonetheless, with the lower holiday period volume, it is possible that the traders will play with the market in whatever direction they feel they can push the easiest.

From a chart basis, though, it is also necessary to remember that it is not likely the market will be able to generate any kind of a lasting or strong move up without first re-testing the lows. Whether that is to happen now, or in 3 months is the $64 million dollar question.