Today's action did little but augment the near-term case for bearishness. As you can see, the S&P 500 attempted... and failed... to regain its 65 DMA. I suspect that within a couple of days, we'll see this index make a test of 1325.
If the BKX is any indication, there is a better than even chance that a new significant down move has commenced in equities:
One thing I learned from Gary was the difference between right-translated and left-translated equity cycles. Right-translated cycles... meaning bull cycles that last longer than the average 4 years... tend to end mean and nasty (think Glen Close in Fatal Attraction kind of nasty). Now, the market began to see such an ending at the beginning of the year. In fact the 2003 to 2008 cycle was the second most right-translated in history, and the only two that were comparable both saw quick 40% declines in equity prices (1938 and 1987).
However, Señor Bernanke and his banana republic cabal saw fit to take unusually aggressive steps to interfere with the market cleansing process (maybe oil prices are going up due to all the energy demands from the Fed's printing presses...). As a result, the market's waterfall decline was floated in a sea of liquidity, if you will excuse the cliché. It is quite possible that process is now about to complete. If so, I would expect to see the market test 1325, bounce as if the correction were over and new highs were inevitable, and then tank into oblivion. The bounce from 1325 would likely coincide with a back test of the 75 level on the BKX. If this scenario should play out, shorting equities as the BKX touched the underbelly of 75 would present a low-risk (tight stop) entry.