FOMC WEEK!

The Dow made its first significant retreat last week, down 2.95%, making a new 3 weeks low.

In fact, the Dow formed a evening star candlestick formation on its weekly chart right around its 50 period moving average. An evening star candlestick formation is a bearish candlestick formation which is particularly strong around resistance levels. An evening star forming around its 50 period moving average during a time of widely anticipated pullback certainly must ring a bell of caution.

This week is also FOMC week and the Feds are definitely going to keep rates unchanged and say a lot of good things about the economy going ahead (see stock market calendar). Since there isn't going to be any surprise, I would expect the week to be largely technicals driven, which may be a little less than bullish with the way the Dow is behaving now. Before you walk away thinking that the pullback is a bad thing, please understand that the quality of the pullback decides if we are now reversing into a bull market or still in a bear market under the Dow Theory. Until it does, this will always be an intermediate bull trend in a primary bear market.