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The Dow rose 70.51, or 0.58 percent, to 12,280.32 after Friday's rout, which was the worst tumble on Wall Street in 15 months. During trading Monday, the blue chip index rose more than 100 points, fell briefly into negative territory, and then rebounded again.

Broader stock indicators finished mixed. The Standard & Poor's 500 index rose 1.08, or 0.08 percent, to 1,361.76, while the Nasdaq composite index fell 15.10, or 0.61 percent, to 2,459.46.

Declining issues outnumbered advancers by nearly 2 to 1 on the New York Stock Exchange.

CANDLESTICK ANALYSIS

DJIA
Today's formed a green candlestick, representing normal buying pressure.  The Bearish Engulfing warning from Friday was not confirmed today, but is still valid for tomorrow's session. 

SPX
Today formed a High Wave, representing indecision in the market.  We still have a valid Bearish Engulfing warning from Friday as well. 

SPY
Today formed a Red Spinning Top, which represents indecision.  The last two days formed a bullish Homing Pigeon, marking a potential bullish reversal.  Confirmation is required tomorrow. 

TRAN
Today's formed a bullish Green Opening Marubozu candlestick.  The last two candlesticks formed a bullish Harami Pattern, which will require confirmation tomorrow.

1:00 AM please forgive any mistakes!

NEW YORK - Wall Street plunged today, taking the Dow down 395 points.  This marks it's worst day in 15 months, after the government said the May unemployment rate jumped the most in 22 years and oil prices shot to another record near $140, renewing fears that the US economy faces 1970s-style stagflation.  Crude jumped $11 - its largest ever one-day spike in dollar terms, fueling concerns about inflation and consumers' spending power, a key driver of economic growth. Oil thundered past the old high hit in late May on the dollar's weakness and tensions in the Middle East.

Crude oil has seen a huge rebound this week after falling amid a drop in demand for gasoline. The jump continued today; light, sweet crude set a high of $139.12 in after-hours trading on the New York Mercantile Exchange after settling at $138.54, a gain of $10.75 in the regular session. The surge followed a Morgan Stanley shipping analyst's prediction that oil would reach $150 a barrel by July 4; a decline in the dollar and fresh tensions in the Middle East added to crude's advance.

The soaring price of oil has intensified the market's worries that ever-expensive fuel will lead consumers to curtail their spending on nonessentials. With gasoline at the threshold of a national average of $4 a gallon, crude's surge higher is expected to propelling gas even higher -- and make Americans even more reluctant to spend.

Moreover, the spike in energy prices came as the Labor Department said the nation's unemployment rate jumped to 5.5 percent in May from 5.0 percent in April. It was the biggest monthly increase since February 1986 and the rise leaves unemployment at it highest level since October 2004. Wall Street had predicted an uptick to 5.1 percent.

The number of U.S. jobs shrank by a smaller-than-expected 49,000, but that development offered Wall Street little solace given that May marked the fifth straight month of jobs losses. In trading today, the Dow Jones industrial average fell 394.64, or 3.13 percent, to 12,209.81. Broader stock indicators also fell sharply. The Standard & Poor's 500 index lost 43.37, or 3.09 percent, to 1,360.68, and the Nasdaq composite index fell 75.38, or 2.96 percent, to 2,474.56.

Candlestick Analysis

$INDU/SPX
Yesterday's confirmed Bullish Doji Star Pattern failed with today's Red Opening Marubozu.  We now have a Bearish Engulfing pattern to watch for on Monday.

Weekly
Last week formed a Bullish Harami pattern on both DJIA and SPX, however this week created a Red Opening Marubozu, placing the confirmation on hold.  A green weekly candlestick next week will confirm the reversal.

$TRAN
Yesterday's Bullish Three Outside Up pattern has been rejected with today's Red Marubozu.  The Bearish Engulfing pattern confirmed on Tuesday June 3 is still in effect both on SPY and TRAN.


Elliott Wave Analysis

On my May 20 update, I wrote: "following the May 1 forecast, it looks like wave 'c' ended at yesterday's high, one day late."  Since that high, DJIA has dropped 945 points.

We saw the selloff accelerate once the rising trendline had been broken followed by a break of the yellow horizontal support seen on Chart 2.

At that point, both counts called for a short position, either for a Wave 1 of Y decline (bearish count) or Wave B of major B.   Today's decline brought us to the Wave B of B target area.  However, the bearish count still allows much more downside, to the March and Jan low area before Wave 2 kicks in.  I have simplified the counts, provided below.

Bearish
http://i303.photobucket.com/albums/nn147/goldcrudedj/BEARISHCOUNT.png
The Oct-Nov decline equaled 1474 points.  An equal decline from the May 19 high will take us down to 11663, close to the Jan/March lows.

Bullish
http://i303.photobucket.com/albums/nn147/goldcrudedj/Bullshcount.png
The Bullish 'B' target shown is 12150 at the 62Fib area.

Minor counts from the May 2 high:
Yesterday I was incorrect in stating the end of the major diagonal triangle from the May 2 high.
Below is the minor diagonal from the May 29 high to the June 4 low mentioned yesterday.
http://i303.photobucket.com/albums/nn147/goldcrudedj/6-5-08DIAGONAL60MIN.png

On a closing daily chart, I have adjusted my chart to show the possible diagonal still in play.  If this holds, it should end soon, around the bullish target of 12150 mentioned above.
http://i303.photobucket.com/albums/nn147/goldcrudedj/6-6-08diagonaldailyclose.png

A more bearish count I see shows an extended third wave starting from the May 29 high, meaning today's 400 point drop was a wave 3 of 3, which explains the powerful move.  This count allows one more small rally (wave 4) and final wave 5 decline.

Time cycles:
The first decline from the October 11 high (October 9 on closing basis) to the November 26 low lasted 33 working days (35 closing).  From the May 19 high, 33 days takes us to July 2, while 35 takes us to July 7 (closed on the 4th).

Here is a time cycle graph I put together just after the May 2 high for those interested.  The White time cycle is based on the May 2 daily closing high.
http://i303.photobucket.com/albums/nn147/goldcrudedj/DJIATIMECYCLEPREDICTIONMAY8.png

Have a great weekend

Andrew

AIG reported it lost $7.81 billion -- its second straight quarterly loss -- and revealed plans to raise $12.5 billion in the coming months. The world's largest insurer, like many of its peers in the financial services sector, has seen its investments in the credit markets plunge in value.

Meanwhile, rising crude oil prices remained a source of worry for investors, as they had much of the week and in recent months. Oil futures rose above $126 a barrel for the first time, further stoking Wall Street's concerns about inflation that could curtail consumer spending. Light, sweet crude rose as high as $126.20 on the New York Mercantile Exchange before settling at a record $125.96. For the week, oil jumped nearly $10.

Phil Orlando, chief equity market strategist at Federated Investors said investors retreated primarily because of the AIG news.

"That news came as something of a surprise to some and a wake-up call to most that the financial-service companies are not yet out of the woods."

But Orlando noted that the market has pulled back this week after a sizable rebound in the last two months and that some investors might be eager to lock in profits while Wall Street irons out some concerns about the financial sector.

"Our view has been that the market, generally speaking, is in pretty good shape with the exception of the financial service companies and the consumer dictionary companies," he said, noting that the news from AIG is an important reminder of the troubles remaining among financials.

The Dow fell 120.90, or 0.94 percent, to 12,745.88.

Broader stock indicators were also lower a day after the stock market notched a modest advance. The Standard & Poor's 500 index fell 9.40, or 0.67 percent, to 1,388.28, and the Nasdaq composite index fell 5.72, or 0.23 percent, to 2,445.52.

For the week, the Dow fell 2.39 percent, the S&P 500 declined 1.81 percent and the Nasdaq lost 1.27 percent.

Bond prices were little changed. The yield on the benchmark 10-year Treasury note, which moves opposite its price, stood at 3.78 percent late Friday, unchanged from late Thursday.

Gold prices advanced, while the dollar traded mixed against other major global currencies.

The economic figures arriving Friday underscored the slowdown in the U.S. economy. The Commerce Department said the U.S. trade deficit narrowed in March as demand for imports registered the biggest decline since the last recession was ending. The deficit stood at $58.2 billion, a decrease of 5.6 percent from February. The 2.9 percent drop in demand for imports was the steepest monthly decline since December 2001 -- a month after the last recession ended.

Noman Ali, portfolio manager of U.S. equities for MFC Global Investment Management in Toronto, doesn't expect the market will test its March lows and said some of Wall Street's angst over rising oil prices is overdone.

"Our view is still positive on the market. Obviously oil is hurting but I think the consumer fiscal stimulus package is going to help," he said, referring to rebates the U.S. government is now distributing.

He contends the wealthier Americans who account for an outsize percentage of U.S. consumer spending won't stop reaching into their wallets because of higher oil prices and that overall spending hold up better than some on Wall Street are predicting.

In corporate news, AIG fell $3.87, or 8.8 percent, to $40.28 after reporting its loss. The stock was by far the steepest decliner among the 30 that comprise the Dow industrials.

Citigroup Inc. said it hopes to shed between $400 billion and $500 billion in assets and increase revenue by 9 percent over the next few years as it tries to recover from big losses tied to deterioration in the mortgage and credit markets. Citi, one of the Dow 30 stocks, fell 67 cents, or 2.8 percent, to $23.63.

General Motors Corp., also a Dow component, fell 86 cents, or 4.1 percent, to $20.29 after reporting in a regulatory filing it would provide financial support to help settle the 10-week strike at auto parts supplier American Axle and Manufacturing Holdings Inc.

Consumer electronics chain Circuit City Stores Inc. said it received a letter from suitor Blockbuster Inc. that the company's largest shareholder, financier Carl Icahn, is prepared to buy Circuit City even if the video rental chain can't win the necessary financing or shareholder approval.

Circuit City jumped 28 cents, or 5.9 percent, to $5.07, while Blockbuster slipped 2 cents to $2.66.

Investors' caution Friday precedes what will likely be a busy week of economic news now that the flow of quarterly earnings reports is beginning to ebb.

"Next week I think will be a fairly important economic week," Orlando said, pointing to expected reports on retail sales, retail inventories, industrial production and regional manufacturing.

Declining issues outnumbered advancers by about 8 to 7 on the New York Stock Exchange, where consolidated volume came to 3.40 billion shares, compared with 3.70 billion traded Thursday.

The Russell 2000 index of smaller companies rose 0.50, or 0.07 percent, to 720.05.

Overseas, Japan's stock market fell 2.06 percent. Britain's FTSE index fell 1.05 percent, Germany's DAX index fell 0.97 percent, and France's CAC-40 fell 1.88 percent.

The Dow Jones industrial average ended the week down 312.32, or 2.39 percent, at 12,745.88. The Standard & Poor's 500 index finished down 25.62, or 1.81 percent, at 1,388.28. The Nasdaq composite index ended the week down 31.47, or 1.27 percent, at 2,445.52.

The Russell 2000 index finished the week down 5.69, or 0.78 percent, at 720.05.

The Dow Jones Wilshire 5000 Composite Index -- a free-float weighted index that measures 5,000 U.S. based companies -- ended Friday at 14,040.05, down 211.01 points, or 1.48 percent, for the week. A year ago, the index was at 15,259.58.

CANDLESTICK ANALYSIS

$TRAN/$DJIA/$SPX
A Bullish Harami pattern did form on all three indices May 7-8 but was not confirmed today.  The pattern is not rejected, however, and Monday can still confirm. 

ELLIOTT WAVE ANALYSIS

Today's DJIA low of 12714 and SPX low of 1384 reached the May 1 Forecast target, both in price and time.  Here is a larger picture for a closer look.  Time axis of lines not to scale.
http://i303.photobucket.com/albums/nn147/goldcrudedj/Dow%20Jones/5-1-08projection.png?t=1210376557

The chart below shows that DJIA now sits on the yellow trendline support from the previous triple top, as well as the grey rising trendline support.  We also see rising trendlines on the technical indicators. 
http://i303.photobucket.com/albums/nn147/goldcrudedj/Dow%20Jones/5-9-08.png

Today's 15M chart shows an ABC flat correction lasting the entire day today, suggesting more downside is needed Monday to complete 'b'. 

Oil prices have doubled over the past year, causing gasoline prices to surge further into record terrain and strap consumers, who drive more than two-thirds of economic activity, with another financial burden.

Wall Street slid amid a cacophony of worries about the effects of rising prices. Kansas City Federal Reserve President Thomas Hoenig in a speech late Tuesday pointed to inflation as his main concern. Treasury Secretary Henry Paulson said in an interview with The Associated Press Wednesday that while the worst of the credit crisis might have passed, rising gas prices will dampen the benefits from the 130 million economic stimulus checks that the government is distributing.

While some observers say recent stock market gains had come too quickly anyway, others contend the market's declines reflect more serious worries about the difficulties blanketing consumers.

Ed Peters, chief investment officer at PanAgora Asset Management in Boston, said, "It is going to be a drag if we continue to get rising prices. The oil price is just symptomatic of a broader trend."

But Stephen Carl, head of equity trading at The Williams Capital Group, said that while rising oil prices appeared to rattle investors, many had also seen sizable gains from stocks in recent weeks and wanted to preserve their profits.

"Perhaps we fall away here for a few sessions," he said, noting that the Standard & Poor's 500 index's rebound to the 1,400 level might have been too hasty for some investors.

The Dow fell 206.48, or 1.59 percent, to 12,814.35, after fluctuating early in the session.

Broader stock indicators also declined. The S&P 500 fell 25.69, or 1.81 percent, to 1,392.57, and the Nasdaq composite index fell 44.82, or 1.80 percent, to 2,438.49.

Bond prices rose as investors pulled more money out of stocks and placed it in the safer confines of the Treasury market. The yield on the benchmark 10-year Treasury note, which moves opposite its price, fell to 3.85 percent from 3.92 percent late Tuesday.

Light, sweet crude rose $1.69 to settle at $123.53 a barrel on the New York Mercantile Exchange, but traded just pennies away from $124 during Wall Street trading.

The dollar rebounded against other major global currencies, and gold prices fell.

While stocks pulled back, the day was not without good news. The Labor Department said labor costs rose at an annual rate of 2.2 percent during the first quarter. That's down from a 2.8 percent rise the previous quarter, suggesting that inflation pressures may be letting up.

But there have not been enough strong readings lately to give investors the nudge they need to push the Dow back above the four-month highs it reached last week. Market analyst Edward Yardeni noted that the Dow, the S&P 500 and many key individual stocks are close to their 200-day moving averages.

"Not everybody's a fan of technical analysis, but everyone knows that this is an important technical level," Yardeni said. "We need some really good bullish news to break above that average."

In corporate news, Clearwire and Sprint Nextel Corp. said they are planning to merge their wireless broadband units to create a new $14.55 billion wireless communications company. The new company is getting a $3.2 billion investment from Intel Corp., Google Inc., Comcast Corp., Time Warner Cable Inc. and Bright House Networks.

Clearwire fell 24 cents to $16.22 after spending most of the session higher and Sprint slipped 3 cents to $9.16.

In earnings news, The Walt Disney Co. reported late Tuesday its profit in the most recent quarter rose 22 percent despite the Hollywood writers' strike. Disney was among the handful of the 30 stocks that comprise the Dow industrials to advance, rising 97 cents, or 2.9 percent, to $34.70.

Yardeni noted that while the first-quarter earnings season began several weeks ago with worse-than-expected results from General Electric Co., it ended up bringing decent numbers, with earnings excluding the financial sector rising close to 10 percent.

"There is a perception in the markets we had a great move here since March, and that we need to take a break from the rally for a while," Yardeni said. "And then we'll be set up for a summer rally."

The Russell 2000 index fell 13.58, or 1.86 percent, to 716.21.

Declining issues outnumbered advancers by more than 2 to 1 on the New York Stock Exchange, where consolidated volume came to 3.94 billion shares compared with 3.77 billion shares traded Thursday.

Overseas, Japan's stock market rose 0.38 percent. Britain's FTSE index closed up 0.74 percent, Germany's DAX index rose 0.84 percent, and France's CAC-40 rose 0.68 percent.

CANDLESTICK ANALYSIS

$TRAN
Bullish reversal warning rejected.  Bearish reversal from 5/5 still in effect.

$DJIA/$SPX
Bearish reversal confirmed today with today's long red candlestick.

DIA
Bullish reversal warning rejected. I will post the next bullish signal. 

ELLIOTT WAVE ANALYSIS

Forecast from May 1 still holding up nicely with today's third wave decline from the May 2 high.