Six weeks and counting the Dow has closed lower. This week, we watched as the Dow couldn’t hold any gains and closed on the lows with increased volume from the previous week.

An additional strike against the major index is the fact that it closed below 12,000, a major psychological support level.

While it all sounds bad, I want to make something clear. We are seeing a prolonged drop in prices but it is very one-sided action with unimpressive volume associated with it. I think the market is in a position where it wouldn’t take a whole lot to sway the market in the other direction. Not saying it will happen, just want to bring it to your attention.

Take a look at the weekly chart of the Dow:

The long-term trend is still up, but the Dow is about to converge with the 50 week moving average and get a real strength test.

On the weekly chart, we really haven’t seen any overwhelming volume usually associated with a major turning point in the market. Check out the bottom back in ’09 and the huge volume spike that went with it.

So it’s really a double-edged sword for investors. On one hand, we haven’t seen major topping action based on the volume. On the other, we haven’t seen any sign of strength since the beginning of May.

Take a look at the daily chart of the Dow:

The 200MA is approaching quickly and will be a big tipping point for the Dow. Still looks like 11,750 is the target for any support.

The daily chart shows a pretty tight down-trend since the start of May and, as mentioned in the caption, a real tipping point around 11,750 when you look at the 200MA and the V-bottom in the middle of March.

Watch for volume to increase as the index moves towards that point as bulls start to buy what could be considered a dip. If volume doesn’t pick up, I don’t think we will see much of a struggle for the Dow to continue falling.

Here are some great quotes from the WSJ this weekend:

If past investor behavior is a guide, the market could be in for a more severe decline unless the current worries are quickly resolved. Just a year ago, investors reacted much more powerfully amid the same cocktail of worries about global growth, European debt and the sluggish U.S. economy. They knocked the Dow down nearly 14% from late April through early July. – E.S. Browning

Many analysts consider the Fed’s easy money to be the single biggest reason for the stock market’s recovery since last autumn, and the Fed now is suggesting that it is loath to keep providing that stimulus. Some investors hope that, if the economy starts looking worse, the Fed will change its mind and launch a third stimulus program, known as quantitative easing and already dubbed QE3 by the investment community. The term “quantitative easing” refers to Fed efforts to stimulate financial markets by buying bonds, injecting fresh government money into the economy in the process. – E.S. Browning

In the near term, there’s precious little data that can overwhelm the negative mood created by the May jobs report. Analysts also have scant hopes of a June jobs rebound. Instead, bets are being made that the second half will prove stronger. – Dave Kansas