We mentioned in our last commentary that we thought a pullback would be beginning and we believe that it is quite possibly that yesterday ended the pullback. This is the place where many technical analysts become bearish due to the large percentage drop (support levels being broken), the high volume, and the gap down at the open. So let's look at each of these issues:

1) It is true that minor support levels were slashed yesterday, but major support still exists and will be discussed in more detail below. Bottoms often have a high percentage drop as well. It is true that following a long-term top you are likely to have high percentage down days, but this also happens at bottoms.

2) Contrary to most technicians beliefs, bottoms most often occur on distributions days of very heavy volume and the day after a bottom is more likely to have light volume rather than heavy volume. This washing out of weak holders allows higher prices in the days ahead.

3) Even though the indices gapped down at the open, as crucial support is still holding, there is little reason to be concerned with this gap. A gap that broke important support levels at the open would be a much higher concern here. Yesterday the indices kept falling after the gap and landed on support.

You can see from the first chart of the NASDAQ 100 how yesterday's and today's low was held right below our support line. The support area was 1745-1755, we just simply put our original line on 1755. Major support was not broken. As long as the NASDAQ 100 is able to hold the 1745 low we can assume that the pullback has ended. A sustained break of that area would likely push the index to the 1675 area and 200 day moving average support.

The S&P 500 fell right into our support line yesterday. The 1390 area continues to serve as very powerful support and as long as this area is not broken we can assume that the decline has ended in the S&P 500 as well.

The Russell 2000 hit our "stop point" of 830 last week and declined as expected. We did expect the fall to end at our support lines and the 50 day moving average, but today's move has quite possibly begun the reversal. If today's low and the 780 support are taken out we believe the index will fall to the 750 level and 200 day moving average support.

Yesterday's decline was very powerful, but our system is still in a buy signal and we do not believe that we have hit a long-term top. The worst case scenario is another decline that takes us to the 200 day moving average. If this happens, we would still classify this move as a "correction" within the larger trend. It is as possible that the heavy volume and high percentage move of yesterday argues that the pullback is over and that the uptrend has already resumed.