What Now?

Top Line: The stock market never makes it easy on the participants. Tuesday's big rally was followed by a lackluster day on Wednesday. The important thing is that the market did give us a couple of good boundaries to watch. You want details so...

We have seen a big drop in the Dow since its October all time high of around 14,150 to its January lows near 11,600, a drop of about 1,550 points. [Editor's note, Thursday morning: so we can't subtract--we really meant 2,550 points.] We thought the recent downtrend was going to take out the January lows but the Dow did not actually manage that task. Some of the other indexes did go below their January lows so we have more complications...thanks to the market for that.

Since the January lows, we have considered that the market has been in a corrective pattern which ended in late February. That should have led us to a very strong drop, and we may actually be in that drop right now, Tuesday's little rally notwithstanding. If, and we do mean if, the market is heading south, we should not see it rally above Wednesday's high around 12,300. If it does, the market will have given us an initial bullish signal.

If the market decides to go down to "finish" its sojourn to new lows, it should stay under that 12,300 level. Of course, this is our preferred track. We don't want to argue with the market so we are paying serious attention to these levels.

Our basic idea is that there will be a final drop in this move down which will bring a lot of angst to the bulls and they may just decide to give it up during this phase. From there we expect a rally of enough power to trade. The timing of these things is the big question.

As it sits tonight, the futures have decided to be weak overnight as Asia responded to the US rollover with a strong down move of its own. Could it be that the world is maybe wondering what we are wondering, Is that Fed out of bullets?

The actual trading on Thursday will take us to a little more understanding of what the market might want to do.

FSI: 71.29 (not much change)

Sorry, no baby pics tonight.