DOW in third leg of medium term correction after -6.9% fall

DOW tumbled sharply overnight by -1861.82 pts or -6.90% to close at 25128.17, near to day low. A short term top was formed at 27580.21 without a doubt. Our preferred view is that rebound from 18213.65 is the second leg of the medium term corrective pattern from 29568.57, which is likely completed.

Immediate focus is now on support zone between 38.2% retracement of 18213.65 to 27580.21 at 24002.18 and 55 day EMA (now at 24886.88). Firm break there will affirm our view and argue that the third leg of the consolidation has started. Deeper fall should then be seen to 61.8% retracement at 21791.67 and below. Nevertheless, rebound from the support zone could retain near term bullishness, for another rise through 27580.21 before topping.

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