This correction has lasted longer than we thought it would, but we believe it is only a correction and not the beginning of a new downtrend. Since the recent highs the Russell 2000 and S&P 500 have had a downleg, followed by an upward consolidation, followed by the current downleg that we are still in. We believe that there is 1-2% left in the fall.

The NASDAQ Composite is about to fall into strong support at its 50 day moving average and horizontal support at 2725. If the 2725 area is broken to the downside (which it likely will be), we see the index falling to 2700. Even though strong support lies in this area, this would form a double top formation in the NASDAQ Composite. At this point, we believe the evidence is still stronger for a bottom at 2700 than a resumption of the downtrend.

We have used red and green lines in the chart of the S&P 500 to show the first downleg, the correction in between, and the current downleg. Support is in the 1445-1455 area. You can also notice that the Fibonacci retracement of 61.8% is at this point as well.

The chart of the Russell 2000 has the same lines drawn on it. You can see how the end of the current downtrend should be in the 765-770 support area.

Often bottoms form at the end of a downtrend that has been quick with high volume. The recent fall has had these characteristics. We believe that the bottom of this correction lies 1-2% below today's close.