Yesterday I excoriated Wall Street for being a bunch of mollycoddled, overfed, aircon-softened weenies, that lacked the courage and conviction to move the ticker past their adversaries. I suggested that they were softened by their extended summer vacations, perhaps too many mint juleps.

Accept the challenge so that you may feel the exhilaration of victory - George S. Patton

Well, today they proved me wrong, at least the Bears proved me wrong. You Bulls need a spine, I’m very disappointed in you. Man it took a long time to get to this point, and there’s no denying the gravitas today’s action in the market carries. Gone is the critical support level of 1260 on the S&P 500, next stop is a big gap down to the July low of 1200.

What makes this event so important is the makeup of the move. It was total market breakdown to the core. That’s right, there was confirmation in the internals as decliners led advancers by a whopping four to one, with down volume eclipsing up volume by more than nine to one on both the Naz and the NYSE!! YIKES!! 

So if you’re a Bull the first thing that probably comes to mind is a bounce. Am I right? Sure there will be bounces, we might even backtest 1260. And let me tell you, don’t get caught up thinking we’ll get back to the promised land. Look at those bounces as opportunities to short, nothing more.

Now I’m going to throw a cautionary wrench into this analysis. I felt pretty much the same way, only on the other side of the battle line, when we broke up through our wedges about a week back. Man, I thought we finally broke through, and I could say goodbye to the froth and start acting like a Bull again, only to be quickly thwarted. Will that happen here? It could, but I doubt it. We’ve slipped into Bear territory and that’s a tough spot. Let me just say that if we do recapture 1260, it will be a miracle.

So what about our favorite stock? You could say that AAPL kind of held it’s own, at least in the first half of today’s session, that is when compared to the other leaders of the pack, namely RIMM, GOOG and BIDU. But as the day wore on the rat pack went down and down hard, AAPL finished at 161.22 down 5.74 (3.44%). The rest went down big, but BIDU suffered the most, down 7.54%! We had leader break downs across all sectors, including financials like Goldman Sachs (GS) and commodities like Potash (POT). Even Oil was down with Light Crude finishing down over 2% for the sixth straight session.

So, listen up investors. Today was a very important day. Don’t take it lightly, because you’ll get burned. Tomorrow we have the Jobs report before the bell. If the numbers are good and we get a bounce, take profits quickly. If we have rallies, sell into that strength and then expect them to get sold off quickly. Be prepared for opportunities to short. Other than that expect plenty of froth until the big boys decide where they are going to rotate their money. It would be futile to try and pick a sector or stock right now. Wait for the market to reveal itself, or use a neutral trading strategy like I described in this blog post.

IMPORTANT: Investors, we are extremely oversold and so we will likely get reflexive rallies. Don’t buy into them, literally. If you have positions in peril, sell into that strength. Also, look for that strength to setup shorts. AAPL may be resilient here, probably not the best short candidate. The market is going lower.

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