Well..it was to be expected. After another week where the major averages saw strong gains we started today's session on a weak note. The market tested the downside but finally found support around Friday's lows and managed to climb back , erasing more than half of its losses.
Regardless of the late strength displayed today I would like to ring the bell of caution. Unless the market takes out last weeks highs rather soon. (i.e. tomorrow) we will see additional selling pressure showing up this week.
The late day comeback was by no means convincing and even though we came off the lows we did not go positive. Hence...everybody who bought into today's late day rally will be left holding the bag if we do not follow through tomorrow.
Combine this with the fact that we are already experiencing buyers exhaustion as well as that we are coming off 4 weeks of straight gains (greatest 4 week run up stocks have seen since the mid 1930'ies)...we might see some selling coming in rather soon.
The key will be the the 8100 level in the Dow. If the market fails to take out this number very soon we will see selling pressure taking the market down by at least 4-5 % within the next 7 to 8 days.
If the market breaks to the upside and makes it above 8100 then this rally might have enough firepower to take us to 8500 in the Dow within days.
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