I am still holding to the idea that new medium-term cycles started in both the DOW and S&P 500 on October 13 (from lows at 28,661 and 3,491, respectively). This means that these indices are 9 weeks into their cycles, and a significant sub-cycle correction is due at any time now. Last week's drop to new lows on Tuesday may have been it; and indeed, those lows were in the center of a strong reversal zone. Both indices have rallied from there, and today both made new weekly highs. Is the correction over? Maybe, but not necessarily. There are other technical signs that suggest this market could fall lower. Is a "Santa Claus rally" back on? It's possible, but I'm not enthusiastic about buying this close to a holiday top, especially when a deep correction is due (overdue).over the next few weeks (unless it happened last week). An ideal corrective drop should at least test the 45-day moving average (last week's drop did not get that low). Right now, that would be around 32,700 (and rising) for the DOW, and 3,875 (and rising) in the S&P 500.
If these indices drop near those targets this week or next, we may look for a place to buy for another sharp rally up. But keep in mind that any rally that fails to exceed the all-time highs in the DOW and S&P 500 from January could set up a very strong short-selling opportunity that we will want to take advantage of as it could be the next serious wave down in a long-term broad stock market correction. Let's remain on the sidelines for now.