Last week I mentioned keep a close eye on the near term support levels which if broken could take the index lower towards 12208 which is where the Dow Jones fell to rest upon.

Not only did the Intermediate Term Momentum sell signal coupled with the bearish Outside bar create weakness but weaker than expected economic data was all too much for the index to deal with. In the end the Dow tumbled sharply to loose -428 points.

If the current position turns out to be a true Wave 4 then it is quite likely that we could experience some choppy price action to lower prices over the coming weeks.

Right now in order for this market to turn higher, much work is required to turn the momentum around from bearish to bullish. It would require breaks above 12650 and 12730 respectively which really needs a serious thrust from where we are standing.

As we approach the summer months the markets could become lackluster and volatility could also subside. But there is no lack of action right now and active traders will appreciate that current market moves are ideal for nipping in and out for short term moves. But these markets are not for the feint hearted as Oil jumped up yet again by +8% and the correlation between the indices and oil may come back into play soon.

If we do see further weakness set in over this week then a symmetrical move similar to what we experienced in February could easily set a downside target of 12111 which may then set a trading range of +/- 1000 points to play with in the summer.

Right now though the intermediate term trend still remains down.