Happy Wednesday ladies and gents. We hope the first half of your trading week is going well, and we hope the last half will be even better. Anyway, today's action was more of the same... bearishness. Yet (and we've talked about this ad nauseam lately), the market's still not reached that technical point of no return. We'll dissect the market "as of" today in a moment. First, a couple of not-entirely-random thoughts. Confidence Improving From All Corners Above all else, if you're in the line of this so-called derecho storm that's supposed to rip through the northeastern part of the country tonight and early tomorrow morning, be aware, and be safe. It looks like some pretty gnarly stuff. News-wise for Wednesday, the word was that the Fed's likely tapering of its QE efforts was the reason for the weakness. But, I think that's just an excuse. I've told you before how journalists have this innate desire to link an effect to a cause; we'd never hear a market guru or analyst say "stocks are going lower because they went too high" (even if that's actually the reason). The end of the Fed's stimulus effort is a very convenient explanation. I just don't think it's the right one. Either way, do bear in mind that the Federal Reserve's quarterly meeting is next week, and that's sure to stir the pot. I doubt it will stir it in a bullish way though. The other item I thought was kind of interesting was how the nation's CEOs are actually voicing a little more optimism now than they have been of late. The CEO Economic Outlook Index moved from 81.0 in Q1 to 84.3 for Q2. Both are well up from Q4-2012's reading of 65.5. The news underscores yesterday's announcement that confidence levels from small business owners is also strong. In fact, the National Federation of Independent Business reported the Small Business Optimism Index hit a one-year high of 94.4 in May. Higher scores from large as well as small businesses mirror the broad rise in consumer confidence, which hit a reading of 76.2 last month. That's a five year high. It's also worth mentioning how 32% of the participants in the CEO Economic Outlook survey said they expect to hire more workers within six months. That's up a little from the last time the survey was taken. I've mentioned to you before to be wary of opinion and intent surveys, since they often express hope rather than reality. To see large companies, small companies, and consumers all expecting better for the economy within the next twelve months, however, we probably should be surmising things are truly going to be better. Most impressive is the fact that all three groups are optimistic despite plenty of reasons for one or more of them to not be hopeful, like lingering unemployment, tepid economic growth, and a very unclear picture of corporate tax policy for the nation. They say the market is never wrong, which I (basically) believe. That explains how the market managed to rally more then 20% since November - most everyone is sure there's still something to look forward to in the future, and are plowing into stocks now to get into the right position in front of the news. It's just taking a lot longer than usual to get the economy up to full speed after the confidence surge. But, it'll get there. That's a long-term theory, however... 'primary' trend data that isn't a factor in the short-term look at stocks we're about to take. Knocking On the Door Well, I can't tell you I'm entirely surprised about today's implosion. That's where the bears left off yesterday, and after a modestly-strong open, the sellers went right back to work. I'm also not surprised about where the selling stopped - right at the now-converged lower 20-day Bollinger band and the 50-day moving average line. Both have been support levels before, and now that they've teamed up it'll be a doubly-tough floor to move under. But, if the market closes under the 1610 mark at any point after today, that should be the beginning of the end. Oh, there's a modest floor around 1608, where the S&P 500 opened and closed on Wednesday and Thursday of last week. So, I guess you could say the last straw is right there. It's pretty much the same scenario ether way though - the market is standing on its last leg. And yes, I'm still in the market-correction camp, even if we don't see that break under 1608 tomorrow. The thing is, it's not so much the S&P 500's current meltdown that has me leaning on the bearish side of the fence as it is the CBOE Volatility Index, or the VIX. We've talked about it before, so we don't need to go into the full discussion now. Just suffice it to say that a rising VIX means traders are becoming increasingly bearish, which is bad for stocks. I've included a chart of the VIX with the chart of the S&P 500 above, but to fully appreciate just how close the market is to falling off of the cliff now, check out the latest version of the weekly chart. The VIX is knocking on the door of breaking above its upper 26-week Bollinger band as well as breaking above a long-term resistance line (blue). The bulls have managed to keep the VIX's breakout at bay so far, but it's getting tougher and tougher to do. It's also on the weekly chart we can see just how overbought the S&P 500 got as of last month, and how much further it could fall before finding a support level and renewing the uptrend. And yes, I do think the market will rekindle the long-term rally. I just think we're going to have to pay our dues first. The line in the sand I'm watching as a potential floor is the S&P 500's lower Bollinger band, currently at 1480.6 (though it's rising every day). Until the S&P 500 actually slides under 1610/1608, however, it's only a hypothetical pullback we're talking about. In the meantime, want to have a little fun and start keeping a paper-trading track record of your opinions on certain stocks? Whaddya Think? If you didn't get a chance to check out the website today, our John Udovich pointed out two highly-shorted stocks... Central European Media Enterprises (CETV), and Blyth (BTH). While we've largely been focusing on large caps to get our now not-so-new stock-rating feature going, I think these two stocks - which the market clearly hates - might be the ideal reason to start taking a poll on some less-covered small cap names. If you know the companies, go ahead and chime in. If you don't know the companies, take a look at what John's got to say about Central European Media and Blyth, then cast your ballot. By the way, Wilfred7 is off to a great start with just two picks, and CLIFTON.SILVA has a pretty good thing going with his first two picks as well. Can anybody out there do better? Get picking. It's easy.