DOW Friday close at 8500

Once more the DOW traded within the established trading range seen over the past 4 weeks, without being able to generate any kind of resolution to the impasse that exists. The DOW was in a position to break support on Tuesday, as it opened slightly higher and strong selling came in taking the index down near the low of the last 3 weeks at 8221. Nonetheless, at that moment the Consumer Confidence report came in a lot better than anticipated and the buying picked up immediately, as the bears pulled back.

With no further surprises seen in the reports that came out during the week, the DOW was able to continue upward, likely due to window dressing that is usually seen at the end of each month. Nonetheless, it must be noted that the index was unable to reach the high of the last 4 weeks.

On a weekly closing basis, decent resistance will now be found at last week's close at 8575. Above that level there is no resistance of consequence until 9035 is reached. On a daily closing basis, resistance is decent at 8504 and very strong at 8575. On a weekly closing basis, support is now decent at 8269 and strong at 8046/8076. Below that, there is nothing until major support is found at 6627. On a daily closing basis, support is now strong at 8269 and then decent to strong support, as well as copious (including the 100-day MA), between 7927 and 8017. Below that level support is minor until the index reached strong support at 7522/7552.

There is little that can be determined with any degree of certainty from the action of the last 4 weeks. The DOW has traded within a 371 point trading range for a total of 19 trading days leaving all traders at a loss to determine where the index will be heading this coming week. Nonetheless, the probabilities "slightly" favor downside movement as the index is overbought, with no retest of the lows, or of the major psychological support at 8000, and with a fundamental picture that is still cloudy.

It is important to note that on Monday, just 30 minutes after the opening bell, the market will be receiving a report that could help determine the direction for the week. The ISM index will be released at 10:00am and it is considered to be an A- report. Last month the index was higher than the previous month (40.3 vs. 36.4), and again a higher number (42) in anticipated this month. Nonetheless, the Chicago PMI index was released on Friday and it came in lower than anticipated. Because of that, analysts are saying that the ISM index could also surprise and come in lower on Monday. With only one other report of consequence due out this week (non-farm payroll on Friday), it is possible the market will take direction off of this report.

Based on the charts I can only state that a daily close above 8575 or below 8269 will make a difference to the direction of the index. A close above 8575 will likely generate a rally up to the 200-day MA at 8782, while a close below 8269 will likely stimulate a drop down to the 100-day MA at 7913. It seems probable that the action on Monday will give the market some direction. It is highly unlikely that another week of trading within this clearly defined trading range will continue.

Possible trading range for the week is 8576 to 8269.

NASDAQ Friday Close at 1774

The NASDAQ was the strongest index this past week as it was able to generate a new 7-month weekly closing high above the previous one at 1739. Once again, strong interest came into buying mid-cap stocks and the index was able to re-generate its upward movement, if only on the weekly closing chart. On a daily closing basis, the index also made a new 5-month closing high on Friday by 10 points, but was still unable to make a statement as it closed right in the middle of a very strong resistance level between 1770 and 1780.

It must also be mentioned that the NASDAQ has strong intra-week resistance at 1786 from the first corrective high after the initial collapse (seen in November). In addition, the 50-week MA is currently at 1785, making this area into a very strong resistance level that will be difficult to breach without strong fundamental numbers.

On a weekly closing basis, resistance is decent at the 50-week MA at 1785. Above that level some resistance will be found at the gap area between 1905 and 1947. On a daily closing basis, decent resistance will be seen at 1780 and a bit strong at 1844. On a weekly closing basis, there is very minor to decent support at 1680 and then no support until decent support at 1552 is reached. Below that level support is strong at 1500 (psychological) and at 1476 (an important weekly close). On a daily closing basis, minor support is found at 1731, decent at 1692, and a bit stronger at 1664. Below that there is minor support at 1608 and stronger between 1552 and 1562 from a previous daily low close of some consequence as well as from the 100-day MA.

The NASDAQ has to be considered the strong index right now as it is the only one with new 7-month weekly and 5-month daily closing highs, as well as the only index that has broken above its 200-day MA. As such, the resistance levels mentioned above, must be closely monitored because if the indexes are to head higher, the NASDAQ will likely lead the way.

The resistances up at 1786 and 1785, on both the weekly intra-day and weekly closing chart (50-week MA) are key levels this week. Any intra-day break above those levels should be considered important. Any break above those levels will likely generate a fast move up to the 1897-1905 level where a strong weekly gap is seen. The gap at 1905 will act as strong resistance but between 1786 and 1897/1905, there is no resistance whatsoever and if the resistance at 1786 is broken, a rally up to that point would likely occur in a prompt manner.

Based on the current resistance levels in the NASDAQ, as well as all the other indexes, the probability of the rally continuing this week is not high. Nonetheless, with the index closing on its high on Friday, Monday will probably be the most important day this week.

Possible trading range for the week is 1786 to 1690.

S&Poors 500 Friday close at 919

The SPX, like the DOW, was unable to generate enough buying this week to test the double top at 929/931, or even get up to last week's high of 924. In addition, like the DOW, the SPX also shows 4 weeks of clearly defined range trading between 930 and 878 as well as a lack of clear direction.

Nonetheless, the SPX had an inside week with higher lows and lower highs than the previous week, as such, the probabilities of a break this coming week, above or below the recent trading range, is high.

On a weekly closing basis, resistance is very strong at 931, as a double top at that level has now been formed. Above that level resistance is non-existent until 968. On a daily closing basis, resistance is decent 919, and very strong at 929. In addition, resistance will also be found this week at 926 as that is where the 200-day MA is currently located. On a weekly closing basis, decent support is found at 882 and minor at 872, and at 866. Decent to strong support is found at 825, and very strong at 800. Major support is down at 683. On a daily closing basis, minor support is found at 893, at 887 and a bit stronger at 882. Below that level there is nothing of consequence until minor to decent support is found at 848, 832, and 825.

The SPX is facing the 200-day MA at 926 this week, as well as major resistance up between 929 and 934. Such resistance will be difficult to break without some strong fundamental help. A daily close above 934 would be strongly bullish and would likely generate moves up to the 1000 level. Nonetheless, after 4 weeks of trying to go higher, and failing, the probabilities of a failure one more time are high.

It is likely that Monday's action will determine the direction for the week. A failure to follow-through on the bullish closing action on Friday will bring in much disappointment and selling, especially when the index was on the verge of breaking down a week ago Monday. In looking at the 10-minute chart, it seems evident that 904 is a pivot point area and should the index start trading below that level, further selling will likely ensue.

Possible trading range for the week is 926 to 890.

During the last 4 weeks the indexes have traded within a well-defined sideways trading range. Traders are confused, as the fundamental picture remains unclear, with analysts split evenly among the bears and the bulls. The odds continue to favor a correction occurring but the odds to the downside, due to the strength seen this week, are no better than 51/49.

On Monday the ISM index will be out at 10:00am and it is possible that report could be used as the catalyst for the week. The probabilities of something getting decided this week are high, and therefore it is likely the traders will be looking for some catalyst/reason for generating movement outside of this 4-week trading range. If the ISM is not a catalyst, perhaps the bankruptcy of GM will be used as such. At of this writing, it is difficult to anticipate how the market will react to the news.