If you look at the relative height of the volume bars, the stack of red bars is not only smaller than the blue stack immediately before it, but shorter still than the red stack that first brought the DOW below its 13-day exponential moving average (drawn in green) for the first time in three months.

So there was less of a punch in the selling than there was last time around. (Good - the market did rally from this point, but it did not get that far.)

Of course, puncturing a moving average that has stood up for three months is kind of ominous. But the volume pattern suggests that not a lot of money is exiting the markets right now (still referring to when this article was first written - May 7).

The strength of the dollar versus the yen is one negative to keep an eye on. This will kick big cap profits in the teeth. If the DOW pierces 140 yen to the dollar - much later - it's going to rain (even though it's summer). But the inflation outlook is the best it's ever been (up one percent over the past year) and the bond market has been strong. These are two very favorable conditions.

What has me scared, though, is the possibility of the 13-day EMA crossing below the 50-day EMA. Again, from the Market Diary page, you can see what kind of carnage was wrought when the EMA's crossed on the Russel T, then on the Nasdaq Composite and both OEX's.