Well it certainly was an exciting week in the markets with the selloffs in Silver and Oil, and the rally in the Dollar. In my opinion the current pullback in stocks is still most likely wave (ii) down in an abc correction that is still in progress. We may see a little more upside next week in wave b up and then another decline to complete wave c down. The SP500 could go as low as 1313.35, the high of the April 18 low day and also exactly 1.382 times wave a down, but there is support at 1320 to 1325. I think any test of that area with a reversal would be a buying opportunity into a June high. Watch for the MACD histogram to turn up at least one bar to confirm the reversal unless there is a hammer or bullish engulfing bar, which would provide a good low risk entry against the April 18 low of 1294.70.
As much as I think the market will eventually retest or exceed the October 2007 highs, the fact is that the Dollar may be getting ready to rally. On a long term basis that is not a problem as John Murphy has pointed out that a rising stock market with a rising Dollar is a positive intermarket relationship. However, in the short term and intermediate term it is likely to mean a falling stock market.
Even though waves (v) and [v] may follow into the end of June, we have seen how quickly the damage can happen with Oil and Silver, so traders would do well not to overstay their welcome. It is probably better to think about taking profits early than giving them all back in a week.
I am looking forward to one more solid round of short term long trades into early June, and then I think it will be time to take a break.