DOW Friday close at 8829

For the first time in over one year, the DOW was able to string together 5 higher close days in a row. Much of that had to do with an oversold market, the Thanksgiving Holiday, and end-of-the-month "window dressing". Nonetheless, it also had to do with renewed hope that the new incoming President will be able to put together a credible game plan that will bring some solutions to the financial industry.

Based on the rally this week, it is now likely that for the next 8 weeks (until the new President takes office January 20th), that a temporary bottom has been set in the indexes. It is unlikely the bears will be overly aggressive knowing that things will likely change with the new administration. Even then, there is likely to be a honeymoon period that could last as much as a month or two before strong selling pressure would be resumed.

Nonetheless, the upside is also likely limited as the DOW has already rallied close to 1400 points from the low made last week and the fundamentals problems have not been solved as of yet. The index is now nearing levels of resistance that are strong and which would require tangible evidence of positive fundamental changes and/or improvements in order for them to break. So far many of the positives mentioned are just proposals and not fact.

It is important to note that during the last recession back in 2001-2003, the DOW traded in a range between 7197 and 9077 for a period of 9 months. During that period of time the downtrend continued as a new weekly closing low at 7528 was made just 8 weeks after the 8019 weekly closing low was generated. Nonetheless, in the interim a rally up to the 9077 level (8873 on a weekly closing basis) was seen. Over that 9-month period of time there were two peaks and two valleys with 7528, and 7740 making the weekly closing lows of the valleys and 8873 and 8896 of the peaks.

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 very minor support from the 20-day MA at 8635. Below that you will find decent support at 8451, at 8283, and very strong down at 8176. 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) Strong resistance is then again found at 9352 from the highest weekly close in the last 2 months. On a daily closing basis, decent resistance is found a few points higher than Friday's close at 8835 and then nothing of consequence until a previous daily high close as well as the 50-day MA is reached between 9245 and 9265.

The DOW was able to break and close above the 20-day MA on Friday. Based on the MA alone, further upside is to be expected. Nonetheless, in situations like this, when the market is likely on a sideways phase, trading on both sides of the 20-day MA is highly likely. Other than minor intra-day resistance up at 8923, the index shows no other intra-day resistance of consequence until the 50-day MA is reached up at 9245. Nonetheless, at that level and up to 9265/9283, the resistance becomes quite strong. If the DOW is able to get above 8923, the probabilities of an intra-day rally up to the 9245-9283 level increase strongly.

With 5 days in a row up on low holiday volume, the oversold condition now over, and a full contingent of traders back on the floor on Monday, it is very likely that the bears will be swarming over this market to sell it short this coming week. Nonetheless, the index closed near its highs on Friday, as well as on its highs for the week, as such, it is also quite possible that some follow-through to the upside will be seen over the first couple of days of the week. In addition, first impression reports from the retail industry regarding Black Friday shopping numbers are not as negative as originally thought they would be. It is possible that this news will give the market an added boost on Monday.

The key level to watch will be 8923. If the DOW is able to get above that level the bears will have a tougher time generating a strong move down immediately thereafter. Nonetheless, if the index fails to get above 8923, the bears will get a bit more aggressive and drops down to 8176 will be likely. If the index opens lower on Monday and the bulls are unable to generate a rally above past week's high at 8831, then the bears will get aggressive and drops back down to the 7883 level are probable.

I do believe probabilities favor that selling pressure will resume this week, nonetheless, from what level and what day it will happen is not clear at this time. Overall, though, I would look to be a seller this week.

Possible trading range for the coming week will be 8923 to 8176.

NASDAQ Friday Close at 1536

The NASDAQ was able to generate a higher close this week than the previous week and gave a sign that it, too, has found a temporary bottom by rallying over 240 points from the lows. Nonetheless, the index failed to close above the previous low weekly close at 1552 and left many questions unanswered as well as the door open for selling pressure to resume.

Under these circumstances, it cannot be said with confidence that the NASDAQ has bottomed out as it did not rally sufficiently enough to erase the previous break of support. Such a failure is not conducive to any new chart buying of consequence.

On a weekly closing basis, support is now strong at 1384. On a daily closing basis, some decent support will be found between 1499 and 1506 but if broken, there is no support until the low daily close at 1316 is reached. On an intra-day basis, decent support is found at 1494 and then again at 1429. Nonetheless, if the latter support is broken, there is no intra-day support until 12.95. On a weekly closing basis, resistance is decent at the previous low weekly close at 1552. Above that there is no weekly close resistance until 1721 is reached. On a daily closing basis, the 1551 level is decent resistance as that is where the 20-day MA is currently located. Above that, there is minor resistance at 1597 and then nothing until the 50-day MA at 1730 is reached. On an intra-day basis, there is decent resistance at 1597 and then nothing until strong resistance at 1786.

The NASDAQ has continued to be the "weak" sister among the indexes and is the only one that has not been able to get above the 20-day MA. Unless all the indexes show strong follow through on Monday, it is unlikely the NASDAQ will be able to get much above the 20-day MA at 1551. Nonetheless, any move above 1597 will likely cause the NASDAQ to become the "strong" sister for at least a week or two.

It must be stated, though, that this index continues to show a negative chart pattern that does not suggest any upside follow through of consequence this coming week.

The 1597 level must be considered a very important short-term pivot point that will generate strong upside movement if broken above. By the same token if the index fails to get above the 20-day MA at 1550 on Monday, or at the latest on Tuesday, strong selling can be expected the rest of the week.

S&Poors 500 Friday close at 800

The SPX confirmed that the previous week's close was not only a successful re-test of the low made in 2002 at 800, but also a double bottom spanning 6 years on the weekly close chart. Such a major chart bottom is what the index needs to hopefully stop the enormous selling pressure that the financial industry is under and has endured for the past few weeks.

Nonetheless, it must be stated that this past week the weekly close was just barely above the previous low weekly close at 876 and was not a ringing endorsement that the selling pressure has totally abated. Further strength this coming week is needed to give the index the kind of space needed to re-test the lows without making new lows.

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 848-852 and major at 752. On an intra-day basis, support is strong at 839-845, and decent at 819. 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 strong at 899/911, decent at the 50-day MA at 970, and major at 998-1003.

The index was successful in breaking and closing above the 20-day MA on Friday and if it is able to generate follow through past the 917 level intra-day, it will likely run up to the major resistance at 1000 or the 50-day MA at 970. Nonetheless, the psychological and physical resistance at 899/911 will be difficult to overcome without a fundamental change or a successful re-test of the lows. It is probable that for the next 8 weeks until the new President takes over that the index will be trading in a narrow trading range that spans between 788 on the downside and 940 on the upside, with potential for moves up to 1000. The major double bottom on the weekly closing chart at 800 now looms imposing and will be used as a springboard by the bulls and a liquidation level by the bears. On the opposite side, though, it is unlikely that the bulls will be able to get the index much above the 940 level until there are more tangible reasons for it.

With the index now close to the 900 level, it is likely that the sellers will be more aggressive this coming week. Probable trading range for the week is 817-917.

Going into the Christmas season and 8 weeks away from the new president taking over, it is likely that the trading ranges in the indexes will moderate, though the volatility may remain high. A lot of short-covering and some bargain buying was seen this past week but it is unlikely that the bulls will continue to step up and continue to buy at these higher levels without some tangible evidence that the problems besetting the financial industry have been resolved.

With the indexes being under major selling pressure and making new 6 year lows (in the case of the SPX 11-year lows) less than two weeks ago, it is not likely that the new buying or short-covering will become aggressive until those lows are tested "successfully". It is therefore highly likely that the indexes will be trading for the next few weeks in a sideways to down fashion.

Nonetheless, the rally this past week was impressive and consistent (considering that no major fundamental changes were unveiled) and therefore it still remains to be seen how high they will allow the rally to continue before becoming aggressive again on the sell side. Keep in mind that traders may still try to "push the envelope" further to the upside this week in order to generate stop loss and panic action. It is evident from the charts, though, that even under the best of circumstances the upside is limited at this time. It must also be stated that several important stocks are showing short-term breakouts from previous resistance levels and should they follow-through to their possible upside