DOW Friday closing price - 16346

The DOW generated a very negative week, having fallen 1079 points (6.2%) from last week's close and closing on the lows of the week, suggesting further downside below last week's low at 16314 will be seen this week. The culprits were 1) a falling Chinese stock market 2) a falling oil market 3) support levels of consequence breaking after a confirmed successful retest of the all-time highs 4) worldwide economic slowdown. With none of those negative effects likely or even possibly getting reversed this week, the best the bulls can hope for is a "soft landing".

The DOW finds itself in a pivotal position this coming week, given that if the index falls again as much as it did last week, the August 16.5% correction low at 15370 will be at risk of getting broken. A break of that low would suggest that this move down is probably not a correction but the beginning of a downtrend. As such, much is at risk this coming week.

To the downside and both on an intra-week as well as on a weekly closing basis, the DOW shows decent support at the 16000 demilitarized zone, having seen 4 previous occasions over the past 2 years that it was either support or resistance of consequence on a weekly closing basis and 7 occasions during the same period of time when it was support or resistance on an intra-week basis. Below that level, there is minor to perhaps decent intra-week support at 15866 and decent to perhaps strong support at the August low at 15370.

To the upside and on an intra-week basis, the DOW will now show minor to perhaps decent resistance between 16670 and 16730. Above that level, there is decent resistance at 16933 and then psychological resistance at the 17000 demilitarized zone.

The DOW is facing a very important week as the index could reach levels of support between 15340 and 15745 that are meaningful to the mid and perhaps even the long term trend. The index got back into a long-term uptrend in October 2010 (5+ years ago) when the index broke above the 200-week MA for the first time in 30 months after the recession of 2008 occurred. The 200-week MA is currently at 15745 and if that line is broken, especially if broken on a weekly closing basis and confirmed broken with a break below 15340/15370 (important lows seen in February 2014 and August 2015) it would suggest the uptrend is over for at least 6-months or more. With the index being within "shouting distance" of those levels this coming week, it is possible that some important decisions regarding the future of the index will be made.

By the same token, the probabilities do not favor the bears having that kind of success at this time, especially since the reasons for the drop down to these levels are not likely to continue as they were last week (oil is at support and the Chinese market is also close to a strong support and showed some buying interest on Friday), suggesting the DOW could end up generating a positive reversal week, much like it did in August when the index reached the 200-week MA and then closed in the green. In addition, the earnings quarter begins this week and that usually generates some buying interest for at least for the first 3 weeks of the quarter.

As such, the probabilities favor the DOW getting down to somewhere between 15745 and 15855, or perhaps only down to the 16000 demilitarized zone, and then turning around to close in the green next Friday. Possible trading range for the week is 15855 to 16700.

NASDAQ Friday closing price - 4643

The NASDAQ fell a total of 7.3% this past week (from 5007 to 4643) and closed on the lows of the week suggesting further downside below last week's low at 4637 will be seen this week. The trading range that transpired was the third largest one to the downside seen in the past 56 months and the last 2 times that kind of a trading range occurred (2011 and 2015) the index followed through to the downside (at least on an intra-week basis) an additional 7-9%, suggesting that the index could drop as low as the August low at 4292 this week, if the previous 2 patterns are repeated.

By the same token, on both of the previous occasions the NASDAQ generated a close on the highs of week the following week (once a positive reversal and once simply a recovery), meaning that the traders are likely expecting the same thing to happen this week. On the other hand, the index did generate a rare weekly gap down this last week (between 4999 and 4926) and if another gap occurs on Monday and is not closed by Friday, a breakaway/runaway gap will have occurred on the weekly chart and that is not something that has ever occurred before (not even during the 2008 collapse), which in turn could be a sign that this time things are more serious and that a reversal or a recovery will not occur.

To the downside and on an intra-week basis, the NASDAQ has minor to decent intra-week support at 4547 and a bit less at the September low at 4487. Below that level, there is strong to perhaps major support at the August low at 4292. Further minor to decent support is found at 4116 and then important weekly close support at the 4000 level that includes the 200-week MA, currently at 4025. On a weekly closing basis though, the index has pivotal support at 4635 that if broken would likely thrust the index down to the next (but somewhat breakable) support at 4258.

To the upside and on an intra-week basis, the NASDAQ will show minor resistance between 4777 and 4785 and a bit stronger at 4863. Above that level, minor support is found at 4926 and minor to decent at 4960, which does include the 200-day MA, currently at 4980.

The NASDAQ closed on Friday at a pivotal weekly close support level that is likely to offer a strong clue as to what the index will do for the next few months, based on where it closes next Friday. For the past 14 months, the index has not generated a weekly close below 4635, but more importantly it has generated a total of 5 weekly closes between 4635 and 4686 that in turn suggests this area is extremely important and "short-term pivotal" technical support to the chart traders. A close below 4635 next Friday is likely to make the 200-week MA, currently at 4025, into a big magnet, which in turn would suggest the index would likely not make a new all-time high for at least the next 6 months if not for the rest of 2016.

The probabilities suggest the bulls will be able to "make it happen" as they have done so each and every time since 2008, but with so many fundamental changes (higher interest rates, oil prices collapsing and Chinese market under strong sell pressure), it is a question that now has the possibility of generating a different outcome.

SPX Friday closing price - 1922

The SPX, like the other indexes, not only generated a strong negative week but closed at an area of important weekly close support that if broken would likely have serious and additional negative mid-term consequences. With interest rates now higher and the first important earnings reports in the financial industry due out this week (JPM, WFC, and C), what the index does this week (up and above what the other indexes do) could decide what the traders think the outlook for the market is for 2016.

The SPX closed on the lows of the week and further downside below last week's low at 1918 is likely to be seen. Having generated a 120 point move down last week, it is possible and probably even likely that the August low at 1867 will be seen and if that occurs, a multiple bottom at that price will occur, suggesting even further downside would likely be seen.

To the downside and on an intra-week basis, the SPX shows minor support at 1904, decent support at 1867 and mid-term important support at 1820. Nonetheless, on a weekly closing basis, the stock shows decent support at 1921 and mid-term pivotal support at 1886.

To the upside and on an intra-week basis, the SPX shows minor resistance at 1993 and a bit stronger at 2020. Nonetheless, on a daily closing basis the resistance is decent at 1995. Above that level and on an intra-week basis, resistance is decent between 2060 and 2064.

For the past 19 months, the bulls have been able to keep the SPX closing above 1886 on a weekly closing basis, and for the past 15 months the support has been at 1921. With the index closing on Friday at 1922, it is evident that a red or green weekly close next Friday will be indicative. By the same token, a close below 1921 would be short-term indicative while a close below 1886 next Friday would be mid-term indicative as it would cause the 200-week MA, currently at 1780, to become a magnet.

Having generated a rare weekly gap last week between 2043 and 2038 and then an additional 120 point move down does open the door for another gap on Monday (possible runaway gap), as well as a break of the August low support at 1867. If all of that happens early in the week, it is highly unlikely that the earnings reports in the index late in the week would "turn the tide" around.

Such a scenario would likely cause the SPX to visit the 200-week MA, currently at 1780, which is a line that has not been visited since 2011 and on that occasion that line was not only visited but broken intra-week by 75 points, strongly suggesting that if the intra-week lows seen the past 19 months at 1867 and at 1820 are broken, that a visit to the 1700 level of "general support" could occur.

Probabilities do not favor the SPX having that kind of negative week for all the reasons mentioned above, but the situation is very volatile and fundamentally negative in a way that has not been seen for many years, meaning that eyes need to be wide open for support levels holding or breaking, as they are likely to offer a stronger clue as to what the traders are thinking.

The indexes are likely facing one of the most pivotal weeks in years, given that the fundamental picture has been strongly deteriorating (higher interest rates, oil prices dropping strongly, and the Chinese market in disarray) and levels of short to mid-term support of consequence are close-by that if broken would be technically negative. On the opposite side of the coin, the bulls have been successful each and every time during the past 8 years in turning the market around under these same conditions and resuming the uptrend, meaning that traders will be facing a situation this week with 2 strong and opposite scenarios being the possible end result.

Earnings quarter starts this week with the first earnings reports of consequence (JPM, WFC, and C) coming out on Thursday and Friday and this is a period of time (start of earnings quarter) that usually generates buying interest for at least 3 weeks, suggesting that a positive reversal is the most likely scenario. In addition, there is a decent possibility that oil prices and the Chinese market have reached support levels where a bounce can occur, meaning that if no new lows are made this week in those markets that the bulls will have enough ammunition to generate a positive reversal that would last at least a few weeks. By the same token, these are all questions that have no answer at this time, meaning that this week the traders are coming in to trade with probably the most uncertainty they have felt since 2008.