Wow. Based on yesterday's eventual reaction to the Fed's take on things, we knew the market didn't really like what it was hearing. But, after having some time to sleep on it, today's big bearish opening gap and subsequent drubbing speaks volumes about just how rattled traders are here. I'm sticking to my argument I first posed yesterday - this pullback was going to happen no matter what; the would-be sellers just needed a reason to pull the trigger. The cause is irrelevant though. The only thing that matters now is the fact that stocks are under fire, and we have to deal with. Given the gravity of what's going on, I'm going to devote today's entire edition to what the last couple of days means for stocks, and where it's all going. My main goal is just to provide you with the perspective I know you're not getting anywhere else. First and foremost, don't freak out. I know that's tough to do when the media is trying to make this pullback the story of the century, but keep in mind that's what they get paid to so - sensationalize everything to keep you reading and watching. But, even with Thursday's pullback, the S&P 500 is still only 5.0% off of its May 22nd peak, which isn't much considering the S&P 500 had rallied just under 25% from November's bottom. Second (and again, don't freak out), the market may be due for some more downside before the correction is done. THAT'S NOT NECESSARILY A BAD THING. Ebbs and flows are just a normal part of the market's regular functioning. Those dips are buying opportunities, but they have to be allowed to run their full course before becoming buy-worthy. If you're wondering why we need to be concerned here, all we have to do is update the same chart we've been dissecting for quite some time now. Simply put, the S&P 500 moved under its 50-day moving average line today for the first time since late December (and it was clearly on its way up in December). That's a big deal. At the same time, the S&P 500 - and all the other major indices for that matter - closed under their lower 20-day Bollinger bands on Thursday for the first time since November. Again, it's a big deal, since that lower band line had acted as a floor every time it had been tested up until this point. Throw in the fact that Tuesday's peak followed by Wednesday's selloff means the S&P 500 has just logged its first major lower high since late last year, and the problems reach insurmountable levels. It's not just the obvious stuff on the daily chart that's so alarming, though. Remember the weekly chart we've been looking at from time to time? Here it is again, after today's action. As you'll see, the VIX has moved above its key falling resistance line, while the S&P 500 ran into new multi-week low territory today. What you can also see is that the S&P 500 still doesn't have any viable floors nearby. So how much further might we pull back? Great question. There are a couple of realistic possibilities. One of them is the long-term support line (red) that's tagged all the major lows going back to late-2011. That level's currently at 1454, and rising, though it's still almost 14% below last month's peak at 1687. Honestly though, I don't think that's the relevant floor any longer. A more realistic floor is closer to the 1489 area, where the lower 20-week Bollinger band currently lies. It's rising too, however, so by the time it could be tested as support it should be much higher.... maybe even around the 1537 area. That would certainly be a logical landing point for the current pullback since that level was THE floor for most of April, setting up the May leg of the rally. A dip to that level would also mean about a 9% pullback from the peak level, which is roughly the normal-sized correction. [For reference, the late-2012 pullback was about a 9% drop, and the early-2012 pullback shaved about 10% off the S&P 500's value. The 2011 correction was a 17% affair, and the 2010 Flash-Crash-prompted selloff took about 14% of the market's value. Point being, a 9% pullback from last month's peak would actually be quite typical. We're also overdue for such a correction, after more than six months' worth of rally.] That's my take on things anyway. But, I can also appreciate the logic John Monroe over at the SmallCap Network Elite Opportunity is applying to the current situation. He explained in this afternoon's newsletter: "...we'd been pointing to that all-important 1653 level as the key pivot point now for a few weeks. Yesterday, it failed that level yet again and the markets started moving lower... much lower. Although we've seen a tremendous amount of volatility this week, the end result has been a victory for the bears and it happened at a key pivot point. That's not a good sign for the short-term landscape of the markets. Additionally, the short-term trend line we pointed to on the S&P in yesterday's edition was broken to the downside this morning only leaving 1593 on the S&P as the last potential short-term support level before these markets will likely test the 3/8 retracement of the whole rally that started back in November of last year. ...I don't think it's prudent to short these markets while we're at lows for the week, as well as only being 10 points or so away from 1593. We're going to continue to be patient and pick our spots with either getting long or short any index ETF's at this point. The strategy for us now has become pretty clear. As I type, the S&P is currently trading at 1603, which is only 10 points from potential support, so we want to see what happens between here and there. If for some reason the indexes start to rally before we get to 1593, which is doubtful, we'll likely..." Well, I can't tell you what the plan of action is for the SmallCap Network Elite Opportunity, but you can see where it's going. They've got plan A and then Plan B, and they know how to trade them both, I mentioned this to you yesterday, but it bears repeating today - the SmallCap Network Elite Opportunity has been freakishly good at figuring out where the market's red lights and green lights are going to start it and stop it. If you're not a subscriber, you're missing out. I strongly recommend you become a member, not just for the stock picks, but also for the market calls. Check it out. Anyway, while I can't divulge what the SmallCap Network sees on the near-term horizon and how they're playing it, I can tell you what I see coming next. From here, I see the market bouncing a little on Friday, and maybe even into next week - there are enough permabulls out there who will use any dip as an entry point. I don't think that bounce is going to be a long-lived move though. See, the damage is done. Over the past two days the market has made it clear that it's vulnerable. A couple of bullish days aren't going to change that reality. Unless the S&P 500 can actually bounce back above its 20-day moving average line at 1635 (and that's just not likely to happen), the S&P 500 is probably going to rollover again and finish up the garden-variety correction it started in late May. I know I've already long here, but I think it's worth spending the time on. I've got one more idea to add to the mix, however, and it may be the most important one of all. Simply put, while the market's in pullback mode right now, bear in mind that none of the current action, and I mean none of it, has a thing to do with stocks' fundamentals. The economy is still ok. Not great, but ok. That's why Ben Bernanke is even considering tapering off on the Fed's stimulus effort, which by the way aren't going to be drying up anytime soon. He's waiting for the unemployment rate to get significantly better before turning off the Federal Reserve's spigots, and it's going to be a long while before we make a dent in the nation's tepid employment picture. In the meantime, corporations are doing well enough with the economic hand they've been dealt. Point being, this current correction looks like a secondary trend, which as I discussed back in late May is a trend that doesn't last too terribly long, and is actually an opportunity for those investors who understand the difference between a bear market and a mere pullback. This is just a correction, and not even a confirmed one yet. Let's let it takes its course, and then go bargain-shopping when we get close to the bottom. And yes, we'll be here to help you do it when the time comes. In the meantime, I recommend you use the two-week trail offer the SmallCap Network Elite Opportunity newsletter is offering. You've got nothing to lose, and a lot to gain. Click here to take the offer. Or, copy and paste the following link in your browser: http://www.smallcapnetwork.com/?vmpd_ckstr[click_track]=SCN+Newsletter&vmpd_ckstr_redirect=/pages/SCNEO/v1/