Howdy folks. Would you believe the past two days are actually the most bearish two-day stretch we've seen since late July? It's true. Stocks have lost more ground since Friday's close than they have during any other two-day span in the past two months. Yet, there's still more than a small glimmer of hope, as the key floors we're mentally using as make-or-break levels still aren't broken. We'll take a look at what's not yet wrong with the market in a second. The first thing I want to do is give a shout out to John Monroe over at our sister publication, the Elite Opportunity newsletter. He's kept his finger on the pulse of how the stock market and the bond market have been playing off of each other. And, he specifically suggested the iShares 20-year Treasury Bond Fund (TLT) was due for a bounce back on the 15th. It's been a brilliant trade so far. It's not just bonds he's playing though. He's been able to trade the dollar, and the stock market (through index-based ETFs) at the same time. It's been pretty amazing actually. I think I mentioned this to you once before, but it bears repeating again - stocks aren't always moving well enough to bother trading them. Sometimes, other classes of investment vehicles are doling out all the movement while stocks are stuck in the mud.... like now. If you've been trying to trade the stock market recently, it's gone nowhere and your trades have likely done the same. If you were willing and able to trade the bond market or the U.S. dollar or gold though, you could be up quite nicely right now. I think the TLT trade the EO recommended back on the 15th is now up a couple of percentage points, and still going strong. Yes, we look at gold and bonds and the dollar from time to time too, showing you our chart of how they all move or don't move in tandem. We'll even talk about how you may want to trade them from time to time. The bulk of our time and effort has to be on the bigger picture equity market though, so we just don't get much of a chance to take advantage of other trading opportunities. John Monroe at the Elite Opportunity does get a chance to do so, however, and he does quite well with them. I highly recommend tapping into his service to open up your trading universe. Now, there's a reason I brought this up again today. This afternoon's edition of the EO newsletter took a good, thorough look at how bonds and stocks were acting like they finally wanted to diverge (as they normally trade). As he pointed out, things are starting to make a little more sense now, with stocks tanking, yields falling, bonds rising, gold rising, and the U.S. dollar's rally starting to cool off. You can see the basics on our updated chart of all these instruments. The chart helps you get a grip on how things are shaking out, but if you really want the actionable details, the EO has been able to cover these things a lot more closely than I've been able to lately. You can even browse all the newsletter archives with your free two-week trial. Give it a test drive and see what you think. Here's how to get it. Or, cut and paste this link: https://www.smallcapnetwork.com/?vmpd_ckstr[click_track]=Newsletter&vmpd_ckstr_redirect=/pages/SCNEO/v1/ Now, let's get down to some business. Hangin' On As bad as Tuesday was for the market (stocks lost about 0.6% of their value, on average), we've not yet moved past the point of no return. We're getting pretty darn close though. We've mentioned this before, but it bears repeating now - the 1980-ish level is a huge line in the sand for the S&P 500. It matters more today than it has in a while because today's close at 1982.77 puts the index within striking distance of a breakdown. The chart below pretty much speaks for itself. The S&P 500's lower 20-day Bollinger band and the 50-day moving average line (purple) are about to converge there, and the 1980 level is where the index hit a low a week and a half ago before bouncing into what would ultimately become a failed breakout effort. Though the bears are starting to crawl out of the woodwork and log some higher volume selling efforts, as long as the floor at 1980 level holds up, the bulls still have a shot at coming out of this thing unscathed. It's a long shot, mind you, but it's a shot all the same. Aside from the decidedly bearish volume telling us a break under 1980 is likely, the VIX is starting to push higher too. It's still got room to keep rising though, and the S&P 500 could break under 1980 before the VIX runs into resistance. With all of that being said... It's been a while since we've had any reason to look at a weekly chart of the S&P 500, but a reason is starting to develop now that a fairly significant pullback is on the horizon. Don't worry though - there's actually some good news evident on the weekly chart. Take a look. There's a support line still in place that goes all the way back to late 2012. The 100-day moving average line (gray) has also been a rebound level for the index that whole time. Even if the S&P 500 breaks below 1980, I don't think it would be unreasonable to expect the bulls to at least make some kind of stand there. That floor's around 1955 now, and rising a little every day. This is my long way of saying, even the "bad" isn't so bad.... at least not yet. If the 1955 area fails to hold up as a floor, then we've actually got problems to worry about. Just for the sake of confirmation and clarity, the NASDAQ is pretty much in the same position as the S&P 500. That is, the NASDAQ is close to breaking under a key floor at the same time the VXN is acting like it wants to race higher. As our chart shows, the composite has broken back under a floor around 4545, but it's still above its 50-day moving average line at 4488. With a close of 4508.69 though, it wouldn't take much more to pierce this key moving average line. Again, I'm leaning towards the bearish camp, but the one thing missing thus far is bearish momentum. A break below the 50-day lines should be just enough damage to develop some downward momentum, which will in turn open the selling floodgates. It may not be time to start shorting and getting bearish yet, but we're clearly a lot closer to that outcome than we are a bullish one. Now it's just a waiting game to see which side of the table flinches first. The annoying part about this third bearish day is, we've set up a dead cat bounce that could easily be mistaken for an actual recovery effort. Don't get lured into that trap. It's going to take a lot to repair the damage done to the market over the past couple of weeks, and I'm still pretty convinced we're going to have to make a hard landing before those repairs can be made. We'll talk more about it tomorrow. If there's room and a need to do so, we'll start looking at some realistic downside targets for all the major indices. We're also going to try and give you a marketwide fundamental valuation update. It's tough to believe, but Q3 is almost over and earnings season is just around the corner. Oh, and Chris Vermeulen took a look at the waning momentum of internet stocks and social media stocks today, posting his analysis at the site. It's good food for thought.