Hello fellow traders. How was your Thursday? First and foremost, our hearts go out to friends and family of the passengers on Malaysian Airlines flight 17. It's still not clear exactly what happened or how it happened. It's tragic all the same, though. Was this the reason the market tanked on Thursday? Maybe, though we may want to clarify our definition of "reason." The crash of flight MH17 may have triggered the marketwide weakness, but honestly, stocks were vulnerable to a myriad of selloff triggers. Had it not been this plane crash in the midst of political tug-of-war, it's very likely traders would have found another reason to start dumping stocks. Here's the thing... even with Thursday's harsh pullback, it's not like stocks still don't have a few escape passages they could use to evade a major correction. On the other hand, a rebound and revival is looking further and further out of reach. Where do we start today? You know, let's just start at the beginning and look at the crucial chart components we examine almost every day, starting with the S&P 500 and its volatility index, the VIX. As you'll immediately see, the S&P 500 broke under the 20-day moving average line at 1967 today, and continued to slide. Volume was pretty solid too. While it wasn't surprising to see the VIX break above its ceiling at 13.3, I wish it hadn't been such a dramatic breakout. More on that idea in a moment. The NASDAQ Composite also broke down under its 20-day moving average line, closing under it for the first time since May 20th. Like the VIX, the NASDAQ's volatility index - the VXN - tore past its major resistance lines around 14.0. In fact, the VXN's thrust may have been a little too strong for its own good, begging for a contraction as early as tomorrow. Whatever the case, although it may take a couple of days for the dust to settle after Thursday's meltdown, the market reminded all of us today that stock's aren't infallible. At the very least investors are now considering the possibility we're due for a good-sized selloff, even if we can't say with any degree of certainty it's in the cards. I think John Monroe's assessment of the current situation was spot-on in today's edition of the Elite Opportunity. He wrote: "At this point, there's a number of other technical tools we use suggesting the markets are vulnerable right now, as well as ripe to rollover. However, until something glaring surfaces, we're much better off standing pat in terms of trying to trade these markets to the long or short side on a short-term basis right now because every time it appears the markets are set to finally take a much needed breather, they somehow manage to claw their way back in that final hour. I've included a daily chart of the S&P here today, which we continue to focus on for short-term direction. The NASDAQ Composite is basically a little more of a volatile mirror of the S&P over the last seven days, while the DOW and NASDAQ 100 are leading a bit and the Russell 2000 is clearly lagging. Definitely not a good sign for the near-term landscape. However, until either the S&P breaks to a new high or shows some semblance of serious weakness, I don't think the context is really there just yet to be overly speculating on a short-term trade to either side. I will say the longer the S&P grinds sideways like this, the more it lends itself to a bullish bias. Furthermore, even though our reversal signal couldn't confirm itself as soon as yesterday's close, it doesn't necessarily mean the S&P can't close below [our key indicator line] as soon as today or tomorrow and trigger a selloff. It just means the context for the reversal isn't as strong." That was written as of mid-day on Thursday. In the meantime, the S&P 500 did end up closing below the key technical indicator John seems to use the most. Even then, however - and like John explained - the context for a bigger downside move still isn't in place. That being said... While we're still not seeing "some semblance of serious weakness", we're definitely headed in that direction. Without a major course-correction real soon, we'll have the downside context we really don't want to see. The clues aren't overtly in the charts themselves. Rather, the bearish clues seem to be lying in the market's obscure numbers and data. Yet, the bearish clues seem to be lying in ALL the market's obscure numbers and data. One of the biggest red flags I see is one John mentioned - the fact that the Russell 2000 is falling sharply with the NASDAQ Composite not far behind. Meanwhile, although the Dow and the S&P 500 obviously aren't racing higher, they've sure held up better than the NASDAQ and the Russell 2000 have. It's an important clue, as it tells us traders aren't thinking aggressively here. If they were, the more aggressive indices like the NASDAQ and the Russell 2000 indices would be outperforming the safer indices like the Dow and the S&P 500. In other words, it's a sign of a "risk off" mindset, which is bearish. We also saw the breadth and depth measures we discussed back on the 11th flip to a fully-bearish mode recently. Still, even today's nastiness isn't a screaming problem for the market, as big plunges like today's have been setups for big bouncebacks. I've said it before and I'll say it again - traders' biggest problem is an inability or unwillingness to pace themselves. Were the market to lose a third of a percentage point three days in a row, most traders would quietly conclude it was the beginning of a good-sized pullback, and stocks could lose 10% or more without anybody giving it a second thought. When the market loses more than a full percentage point in one day, however, it forces the habitual bargain-seekers to begin nibbling again, sparking a dead-cat bounce. And yes, while we saw big selloffs from the market's indices at the same time we saw sharp surges from the VXN and the VIX, the whole thing feels very overdone. The question is, will any bounce be strong enough to push the indices back above their key 20-day moving average lines? I'm guessing it will, even if it doesn't happen Friday. Yet, I can't deny Thursday's drubbing was game-changing. This selloff was different than prior stumbles in that investors were hedging against a downside move this time around (as evidenced by the rise in the VIX and VXN). Even if the S&P 500 and the NASDAQ manage to crawl back above the 20-day moving average lines within the next two or three trading days, it's now up to the bulls to prove the uptrend is still intact. Up until today, it had been up to the bears to prove the market was headed for a meltdown. It's a subtle but critical shift. So, let's hope for the best and prepare for the worst, knowing the odds are now stacked against stocks. Let's also not rush things, however. It's easy to be bearish on a wildly bearish day. What I really want to see is how the bears respond to the inevitable bullish pushback from here. If that bullish effort doesn't look healthy, you can probably interpret it as a sign to start placing your bearish bets. Yes, this is crunch-time for the market. I'm not optimistic in the near-term, though I'll once again stress any correction from here is only going to be a short-term move. The long-term bull market is still very much alive, and we'll be using any major dip as a buying opportunity. By the way, while I'm mulling a bearish trade to take advantage of the brewing downside I see on the horizon, I've still not convinced myself I want to make such a play. I do know, however, John Monroe and the Elite Opportunity crew already have a particular strategic bearish trade on the radar. I can't tell you what it is, nor can I tell you when/if they pull the trigger. I can tell you, however, people who are in the midst of the free two-week trial get all the trading alerts just like regular EO members do. If you think there's a bearish trade brewing in all this mess, I recommend signing up for the free test-drive to the Elite Opportunity today. John and his team will walk you right through it. Here's how, or cut and paste this link: https://www.smallcapnetwork.com/?vmpd_ckstr[click_track]=Newsletter&vmpd_ckstr_redirect=/pages/SCNEO/v1/