The rally on Friday did indeed end an upward flat correction for wave (b) of [ii] down. The market is now in wave (c) of [ii] down. I expect more selling today down to 1280 to 1288 in the cash SP500 and down to 1284 to 1288 in the June futures. At the moment the TRIN is above 3.0 and a high close there would probably mark the bottom for wave [ii]. At the very least we are near the completion of a 5 wave decline from Friday's high on the 30 minute chart and some sort of rally should follow soon. We can examine the nature of the rally to see if today's low marks the end of wave [ii] down.
I think this is just the type of action that is needed to bring some fear back into this market to set the stage for wave [iii] up. So far today leading stocks are holding up quite well and this is quite telling.
The action today also clearly shows what will be happening with the US Dollar. Standard & Poors lowered its long term outlook to negative for the US. If the US debt situation deteriorates the Dollar will rally as holders of US debt scramble to buy dollars so they can get out of dollar denominated debt.