The broad stock market took a severe plunge today right at the opening bell (the S&P 500 and NASDAQ also opened with "gap-downs"). This is not too surprising as all three indices were topping out in the center of our current reversal zone, and the DOW made a new weekly high yesterday without the S&P 500 and NASDAQ (bearish divergence signal). Here's what we need to watch for in each index right now:
If the DOW finds support around 34,000 and starts to rally again, it could be a "double-bottom" to last Monday's low and represent the start of a new medium-term cycle. That would be at least short-term bullish. On the other hand, if this plunge continues and closes below 33,613 (last Monday's low), then this would be an older cycle falling to its final bottom which is due anytime over the next several weeks (possibly mid-October).
The S&P 500's current medium-term cycle is not due to bottom for at least more 5 weeks. That means that if this index breaks below last Monday's low (4,306), it will likely be headed down for at least a month. But if today's plunge doesn't follow through over the next few days and reverses back up, then this index could rally some more into October for another high (possibly a new all-time high) before another severe drop. (Today's "gap-down" makes this bullish scenario seem less likely - but still possible).
The NASDAQ is the youngest of all three cycles. Today it dropped to strong support around 14,500. If that support area can hold, this index, like the DOW, could also be forming a "double-bottom" with last Monday's low for the start of a new medium-term cycle. That would be bullish. It seems more likely, however, that this support could break. If that happens, the NASDAQ could be down for many weeks (even months).