In my last update, I said that I was expecting a short-term rally, then a decline to a new low to end the correction. Even though there have been two huge rallies following the intraday low on Monday, I do not think they lasted long enough to suggest that a new low would be the ultimate bottom.
At Tuesday’s close, the S&P was sitting at Monday’s intraday low. The Dow might also have to retest its Monday low, but I think that we will soon get either a substantial countertrend rally, or else continued sideways movement within the trading range established over the past couple days.
Last weekend I said my target for a bottom was Dow 15500-16000. On Monday, the Dow broke the lower end of that range, hitting 15370. I think that before this correction ends, we will break below 15370, but not by a massive margin. The worst-case scenario I see right now would be a drop to 14500-14700 (the low end of the May-October 2013 trading range). The S&P 500 may need to return to its October 2014 low at 1820.