The "purple crayon" traders, as Jeff Macke would call them, showed up in force today selling, selling and selling some more. The selling was triggered after the S&P gapped down through it's up trend line (drawn with a purple crayon) from the March lows.

I mentioned that possibility in my last entry and today it came to fruition. It actually was a simple thing to spot and I'm sure most of you saw it as well. The market was rising in a bearish wedge and something had to give. Today it did. The pattern broke to the downside just as it does MOST of the time. (But "most" does not mean "always". Remember that for future reference)

So today everybody got what they wanted. The bulls were BEGGING for a pullback to buy, buy, buy. The bears were looking for that trend line break to claim they're back in the game. So everyone should be happy tonight, right?  

I'm not sure the bulls are feeling as bullish about this dip as they thought they would. That's the nature of breakdowns from relentless up trends. The break can feel shocking after weeks of nothing but up.

During that period the market goes up on good news. It goes up on bad news. It goes up on no news. It doesn't appear it will EVER go down again. Everyone wants a dip. PLEASE God, just give me one dip and I'll be a good boy and buy this time! Then BAM...it happens. The break comes and suddenly their finger is a little hesitant around the keyboard. Anybody relate?

So what's next? The support levels are very clear.....875, 850 then 820. My guess is that 850 holds the most promise for support to hold.  I wouldn't be surprised by an undercut of 850 to run some stops first before a reversal takes hold. A break of 850 and then 820 would be very damaging, but not necessarily fatal to the uptrend.

Now that we've actually had the breakdown, I wouldn't be surprised to see some sideways action between 850 and 900 for a while to finish burning off the overbought readings.

A complete reversal of todays collapse would mean something else is occurring. Tomorrow should tell us.