Pullback

The S&P 500 pullback must drop at least 3% and last two or more days. If the S&P 500 does not decline by at least 3%, the pullback is ignored even if both Dow indexes decline sharply. Only one of the two Dow indexes must confirm the pullback by declining for two or more days. The Dow Industrials or Dow Transports do not need to confirm the 3% extent of the pullback. After a valid secondary reaction rally forms, the next step is to watch for a pullback. If both indexes break below the prior lows during the pullback, the primary bear market is reconfirmed and no buy signal exists.