Higher or Lower?

The Dow surrendered almost all of the gains from two weeks ago last week, retreating 2.2% on heavy profit taking.

Yes, all big single up days spur waves of profit taking and thats exactly what happened last week in a relatively quiet week without any major economic releases. Even though almost all gains have been surrendered, the Dow has been brought out of short term overbought territory and rebounded off the daily 30MA last Friday which is definitely a positive.

If the Empire State Index on Monday (see Stock Market Calendar) turn out well, it could fuel the continuation of this intermediate bull trend, leading the Dow higher from here onwards. However, if the market does not hold up and close significantly lower than the daily 30MA, then the market could go into a deeper correction as far down as 10,750 again.

For now, the Dow remains in a short term neutral trend, intermediate bull trend within a primary bull trend.
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