DOW Friday close at 8799

The DOW had a small correction last week when the index closed lower than the previous close for only the second time in the last 15 weeks. It is evident by the lack of volume that buying interest at these higher price levels has diminished strongly and that further upside will be labored. For the same reason, though, it is also evident, at this time, that new selling is limited and that further downside of consequence will probably be hard to accomplish as well.

It is important to note that most of the reports that came out last week were better than expected, and yet the market was unable to respond with higher prices. Such action seems to underline the fact that even the bulls are expecting some form of correction at this time. For that reason alone, it is likely that the index will continue lower this next week.

On a weekly closing basis, decent resistance is now found at 8799. Above that level, resistance is strong at 9035 and even stronger up at 9325. On a daily closing basis, minor resistance will be found at 8575 and stronger up at 8799. Above that level decent to strong resistance is found at 8924/8936 and stronger at 9035. On a weekly closing basis, support is decent at 8515, strong at 8269 and strong again at 8046. On a daily closing basis, there is minor support at 8497, and strong support between 8269 and 8300. Below that level strong support will be found between 7937 and 7957.

The DOW continues to trade in a summer doldrums fashion with small weekly trading ranges and low volume. Nonetheless, this past week the index did generate a spike down move on Monday of over 210 points and never did recover from it. The spike action shows up on the chart as an inverted flag formation that if broken (a break below 8461) offers an objective of 8196. Nonetheless, should the break of 8461 occur, the index will face several support levels that may be difficult to break, especially when considering the strength seen over the past 14 weeks. As such, reaching the flag's objective may be difficult to achieve.

The first support level will be the 50-day MA, currently at 8376. Though the 50-day MA is generally not considered strong support, in a bull trend such a line usually holds up. Below that level the DOW has 4 weeks of intra-week support lows at 8214, 8230, 8222, and 8227. That entire level must be considered strong support, though anytime that you have more than 2 lows at an area, the probabilities of a break of that area increase.

Due to the weakness seen on Friday, a day that should have shown strength as it was options expiration, it is likely that further weakness will be seen Monday, as well as during the week. Looking back one week ago Monday, when the DOW dropped, in a spike type fashion, 211 points. It is certainly possible that will happen again this coming Monday as there are no reports due out that could help the indexes. Such a drop, and how low it goes, will be indicative immediately as to what to expect for the rest of the week.

A drop and close below the 50-day MA will likely generate drops down to the 8220 level, as well as a probable break of that support, making the flag's objective of 8196 likely to be reached. If that happens, it will be evident that the index is in a stronger type correction, with an objective down to the 7900-8000 level, and that the June doldrums and June trading range average of 470 points will have been left behind. As such, it is likely that Monday will be an important day for the week, as it might determine how much can be expected to be seen over the next 2 weeks.

Possible trading range for the week is 8534 to 8196.

NASDAQ Friday Close at 1827

The NASDAQ, with a lower low than the previous week, generated a successful retest of the gap area between 1905-1947 with the 1880 high seen two weeks ago. Such a failure could end up being a strong indication that the recent up-trend has come to an abrupt halt. In addition, the break above the previous daily high close resistance at 1844 was negated when the index closed 4 days in a row below that level last week.

The NASDAQ has been the strongest index on the way up and a likely indicator of exactly what kind of a trend the market is in. Failure to close the gap, when the index was trading near to it, could signal that the market has not only found its top, but that a decent correction is coming. It could also signal whether the downtrend will resume or the lows be tested.

On a weekly closing basis, resistance is decent at 1859. Above that level there is no resistance until psychological resistance is reached at the 2000 level. On a daily closing basis, resistance is decent at 1862 and at the gap area at 1905/1947. Above that level there is psychological resistance at 2000 and minor resistance at 2092. On a weekly closing basis, minor to decent support will be found at the 50-week MA at 1773. Below that, there is decent support at 1680. On a daily closing basis, there decent support at 1796 and minor at 1731. Stronger support is found down between 1684 (200-day MA) and 1692 (most recent low close of some consequence).

The NASDAQ dropped down into a daily and weekly gap area between 1777 and 1792 when it dropped down to 1785. The index was unable to close the gap and generated a rally because of it. Nonetheless, the rally did not accomplish anything of consequence to the upside and with the unexpected weakness of the indexes on options expiration day, it is likely that the gap area will once again be tested this week, and likely closed. It is evident the gap is important to the bulls as leaving the gap open and closing again above 1844 would likely mean further upside is imminent.

The NASDAQ has not yet given any kind of a sell signal, but has given several failure signals over the past week, thus increasing the chances of the index getting into a correction. It is also important to note that the index is the only one, of the 3 main ones, that has been able to get above and stay above the 50-day MA (currently at 1773). A drop and close below the 50-week MA would be considered a strong negative. The index closed on Friday right in the middle of its day's trading range. With the 1844 level being important, Friday's strength should have generated at least a move up to that level. It did not happen. As such, Friday's trading range between 1817 and 1837 will likely be important on Monday. A rally above the 1837 will keep the selling at a minimum and the bulls attempting more upside, while a break of 1817 will likely generate an immediate move back down to the gap area and a new attempt to close the gap and test the 50-week MA. The latter is the most probable as the indexes are presently showing weakness and closure of the gap, as well as a retest of the 50-week MA, is likely.

Probable trading range for the week is 1827 to 1774.

S&Poors 500 Friday close at 921

The SPX probably had the most significant move this week when it failed to follow up on last week's weekly closing break at 946, of the strong resistance from 2002/2002 at 936/940. The 940 level of resistance, on a weekly closing basis, was an important weekly close resistance level that offered the strong probability of a move up to the 1000 level, should that break had stood up. By closing below that level, the bulls had to be disappointed and the bears elated.

In addition, the SPX came to a stop at an intra-day level (956) where no previous resistance is seen, and did generate a spike type drop on Monday, much like the DOW, that projects down to the 874 level if the 903 level is broken. It is important to note that the 874/877 level has been an important pivot point during the last 6 months.

On a weekly closing basis, resistance is decent at 946 and again at 968. Above that level there is nothing until the psychological resistance at 1000 is reached. On a daily closing basis, there is decent resistance at 929, strong at 946, and strong again at 985. Very strong resistance is seen at 1003/1006 from a double top at that level. On a weekly closing basis, support is decent to strong between 876 and 882 and the nothing until minor support at 825. Strong support is at 800. On a daily closing basis, minor to decent support is at 910, and decent to strong support at 899 from an important close seen in October of last year as well as from the 200-day MA. Below that, strong support is again found between 864 and 882.

It is evident the bulls must feel strong disappointment in the week's action as the news was positive but unable to generate follow through on a very strong previous week's close. Nonetheless, this past week the index did generate a successful retest of the 200-day MA when it closed on the line Tuesday and Wednesday and higher on Thursday and Friday. As such, the bulls might be expecting more upside movement in this index on Monday.

It is likely that Monday will be an important day for the SPX as further upside, up to a daily close at 929, seems to be the most probable action. Nonetheless, if the index fails to rally and looks like it is going to close in the red, a drop down to the 200-day MA currently at 902 will likely be the least seen. Keep in mind, though, that a break below 903, will be a break of the inverted flag formation, generating an objective of 874. It is also important to note that the SPX has the same 4 intra-week lows that the DOW has with 879, 878, 879, and 881 being the numbers. Any close below the 200-day MA at 902, will cause those lows to become magnets and likely to be taken out.

Probable trading range for the week is 929-890.

It must be mentioned that all 3 indexes gave failure to follow through signals this past week when they were unable to rally off of the weekly close break of resistance and new 6-month high closes generated the previous week. As such, the probabilities have now shifted toward further downside action unless some strong positive fundamental news is released.

Nonetheless, this is an important week because there are several dichotomies that will need to be resolved. June is normally a very uneventful month with small trading ranges and little decisive movement. As such, it is likely that the coming week will be calm and relatively directionless (perhaps with a "slight" bias to the downside). Nonetheless, if the indexes do break below the support levels mentioned above, the action will heat up, the volatility will increase, and the ranges expand above what was previously anticipated. Such action would likely mean a corrective down phase has started at a time that the news continues to be positive. That would be unexpected and could mean problems are starting to creep up in the economy.

It is likely that Friday's highs and lows will play an integral part for the week. A move above Friday's highs will likely cause the week to act as it was expected to in the beginning, and trade with a "slight" downward bias throughout the week, but within some upside movement. Nonetheless, a break below Friday's lows on Monday could be a catalyst for a strong down week.