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In a holiday-shortened week, risk aversion re-emerged which saw 30-year yields collapse to all-time lows and equity markets to dramatically pull-back from fresh all-time highs. It was quite a week to say the least! A week marked with cross-current moves that triggered extremes for the likes of Gold futures, which cruised through early February highs en route to 7-year highs. Then, there's the US dollar, which has defied logic with falling rates and soaring gold prices. The DXY (Dollar Index) ripped to fresh 3-year highs, allowing for new cycle highs vs the Aussie dollar and the Japanese yen, only to reverse hard on Friday, allowing dollar bulls to scratch their head regarding further strength.

So with so many securities at or near extremes, where does that leave us?? If it wasn't for the 20-day moving average and the fact that it was Friday, both ES & NQ futures could have suffered substantially more given how long it has been since there was a meaningful correction. In other words, the weekend couldn't come sooner for equity bulls.

Friday's sell-off confirmed a major bearish formation, a daily bearish engulfment for both NQ and ES futures. This is when price-action "engulfs" the prior days range, which can signal a powerful shift in trend. That said, this move down still has not done that much technical damage, but the jury is still not out whether stocks are done correcting lower.

Besides maintaining 20-day support, as mentioned earlier, ES futures also manage to hold 3337, which was the exact proximity of the previous high last seen in late January. Typically, when up-trends hold their previous highs that is a signal of strength. ES futures must maintain this level to continue to indicate further strength is ahead.

Moreover, if Friday's price action is seen as exhaustion that also means that Monday's open should hold the lows seen Friday. Thus, early price-action next week is critical for bulls to remain optimistic. If Monday turns out to be a bearish follow-through, then it is likely that stocks are likely to pull-back significantly more.

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