US stocks suffered another round of deep selloff in thin holiday trading on Monday. DOW closed down -2.91% or -653.17 pts to 21792.20. S&P 500 dropped -2.71% and NASDAQ lost -2.21%. Treasury yields also tumbled with 10-year yield down -0.043 to 2.749 and 30-year yield dropped -0.025 to 3.003. 3% handle for 30-year yield is more vulnerable than ever.

For DOW, 38.2% retracement of 15450.56 to 26951.81 at 22558.33 was taken out firmly with today’s decline. And DOW finally caught up with S&P 500 and NASDAQ. There is prospect of recovery due to oversold conditions. But any consolidation would be brief as long as DOW stays below 22339.87.

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DOW is now likely correcting the 10-year up trend from 6469.95 (2009 low) to 26951.81 (2008 high). Thus the retracement levels from 15450.56 become rather irrelevant. Instead, we’ll look for support between 38.2% retracement of 6469.96 to 26951.81 at 19127.73, and 55 month EMA (now at 20153.19), with 20000 psychological level in between. The first leg of the long term correction could only finish after touching this support zone.

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