So far only the NDX has held above its 5/6 low and technically by IBDs rules we could consider a 1.7% rally today on higher volume a follow-through day. However, I don't think that would be a fair evaluation of the correction. The NDX is not lower than its 5/6 low only by virtue of the fact that it was harder hit intraday than the other indexes on 5/6. We should count the 5/25 low as the beginning point of a valid rally attempt, in my opinion, which would make today only day 2 of the rally attempt. Valid follow-through days cannot occur before day 4.
Another reason for caution is that many are considering the 5/6 "flash crash" day as a completed impulse from the 4/26 high, but looking at the daily charts the entire initial decline looks more like a 3 than a 5, which means we need at least one more decline and possibly two to complete a double zig zag correction.
One alternate view that deserves mention is that the entire move down from the 4/26 high is a 5 wave impulse. While not likely, the 5/13 high did not overlap the 4/28 low on any of the major indexes, so this is a possibility. If this does turn out to be the case, then we would expect the summer rally to hold under the 4/26 highs and have a 3 wave form. There will really be no way for us to know until well into the summer if this should be the case.
That said, I believe that this entire episode is a panic and not a crash. Markets always fully recover the losses of a panic. Crashes on the other hand take months and years to recover. We will most likely see an attempt at new rally highs this summer followed by a retest of the panic lows this fall into early December. If this panic has been severe enough to wash out the overly optimistic bulls, it may be that we do not have to see a significant decline this fall. Take a look at a chart of CME. It is possibly forming a very long triangle and in wave e now. If CME breaks out to the upside from the triangle this summer, it may be telling us that we are in wave [C] of x up already.
May 25 may mark the end of the correction, but it is premature to jump to that conclusion. We may need more downside testing to prove the bottom is in.
I am saying this for all of the bears out there that believe we are in primary wave 3 down. It is easy enough to say that we should trade without expectations, but we all have expectations and must ultimately take a position. I just don't think that conditions are right for the primary wave 3 wave count yet. In fact, as you may know, I don't even think that is the right count overall. Just be careful that you don't get fully loaded for bear only to find some long horns in your back side.