The "fat pitch" that was looking good has fizzled into a stinky, foul ball. In all likelihood, we are looking at a bear market.

Tuesday's horrendous and high volume price action has led to a break below our key pivot points. A weekly close below these support levels represents a failed signal. Failed signals generally are a hallmark of a bear market. Thusly, there is significant downside risk.

So what is next? The most likely outcome is a bear market. Our support levels on the SPY (107.58) and on the QQQQ (45.01) are now resistance. For the intermediate term investor - not traders looking for a 3 day bounce -there are two instances in which I would go long this market:

1) if prices on the major indices close above resistance (old support) levels

2) investor sentiment becomes extremely bearish (i.e., bull signal), and within this context of another "fat pitch", I would consider the long side provided I had the necessary risk controls in place.

Over the short run, the market is oversold, and as we come into the quarter end and July 4th holiday, I would expect a bounce. Unless prices close above the mentioned resistance levels, I would look to unload any market correlated long positions into this lift.

In the next article, I will provide an alternative take on the technical dynamics in the market.

I have posted charts of the SPY and QQQQ below showing key pivot points (i.e., red dots) which are areas of support and resistance.

Figure 1. SPY/ weekly

Figure 2. QQQQ/ weekly