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Abyss comes from the Greek word βυσσος meaning “bottomless,” and today we find ourselves falling into what could truly be a bottomless pit.

World markets continued reeling on Wednesday and today doesn’t look much better as jobless claims went up by 13,000 this week to a running total of 472,000 while continuing claims were up 43,000 to 466,500.

China reported that manufacturing activity slowed in June, along with Britain’s June Purchasing Manufacturing Index, while here at home the Institute for Supply Management (ISM) index dropped to 56.2%, its lowest level in six months.

Real estate remains in the dumps with nearly 50% of Florida’s sub prime mortgages in foreclosure along with the other members of the “Fearsome Five,” California, Nevada, New York and Arizona, all clocking in with foreclosure percentages well above the national average of 33%, while this morning pending home sales were reported to have dropped -30% in May.

Credit default swap spreads for Greece and Spain climbed to record highs as investors worried about the ongoing solvency of these countries and Moody’s downgraded the credit ratings on several Spanish regions.

It seems that global markets have realized that the “new austerity” being promoted by the Europeans in the form of spending cuts and tax hikes could suck the life from their financial systems, and as the U.S. stimulus program winds down through the balance of 2010, this withering flow of easy money and government largesse will act like a tax hike in its own right.

Not surprisingly, investors continue withdrawing dollars from U.S. equity funds with more than $1 Billion in the past week alone as human primates once again prove that they will try to avoid pain at all cost.

So while the fundamental picture looks truly bleak, the technical picture was equally decimated by market action over the last two weeks.

As of Wednesday’s close, Wall Street Sector Selector switched to our “Red Flag Flying” mode, expecting lower prices ahead.

The all important 1040 level on the S&P 500 was decisively taken out while the well known Dow Theory triggered a “sell” signal on Wednesday’s close.

On our charts, many Point and Figure “sell” signals were issued and our momentum indicators rolled over, as well, also generating “sell” signals.

The widely reported “head and shoulders” formation on the S&P 500 was broken and the also widely reported “Death Cross,” when the 50 Day Moving Average crosses below the 200 Day Moving Average is today very close to fulfillment.

Overall the last two weeks have been a descent into the abyss, the bottomless pit, and where the bottom might actually be, nobody knows. Ultra bears come up with some truly horrible numbers like 100 on the S&P 500 and 400 on the Dow, but as I’ve said before, no one has a crystal ball and in my view, any “target” is pure speculation.

After all, as we’ve seen before, all it would take is Dr. Bernanke pulling out his money printing bazooka or some positive earnings surprises after the Independence Day Holiday to throw markets into a true frenzy of “risk on” instead of “risk off.”

However, the parallels to the Great Depression become increasingly more ominous and today’s situation is looking more and more like that historic bottomless pit.

My take on all of this is that I’m very excited about the possibilities going forward. Danger and opportunity go hand in hand; if one knows how to make money in both up and down markets, today’s situation offers some of the most compelling opportunities we’ll likely see in our lifetimes.

With today’s inverse ETFs, the most plain vanilla retail investor can “short” the market, even within the confines of an IRA or 401k, and more aggressive traders can take advantage of present day volatility to compress gains that would ordinarily take years into the span of months or even weeks.

Sadly, most people will assume the “deer in the headlights” stance and either be run over by the oncoming freight train or cower fearfully by the side of this dark road. However, for those armed with the skills to mine gold from this bottomless pit, it is a most exciting time, indeed.

Disclosure: No positions

Source: Global Stock Markets Plunge Into the Abyss