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The market took a nose dive today and volume was elevated. Additionally, decliners creamed advancers by 10 to 1. While the bears dominated the market, today's action was neither a big deal, nor a surprise.

My readers knew two things going into the week. First, strong resistance was at 1130 and strong support was at 1085. Until SPX traded outside either price, the market was to be trapped. This has been the stance since July 20th, and I favored an upside breakout. Last month 1130 was our big number to watch on the upside. If it broke on high volume we were going to get aggressively long. After SPX found support at 1085 in July, that became our price to watch for support. If support breaks the chance, a major decline becomes highly likely. Until 1085 breaks down, I continue to be bias towards an upside break. Second, the dollar was up against strong support and highly oversold. I expected that a strong bounce was close. A rising dollar is bearish for the market, especially commodities, and it would take the SPX back down to the 1085 support zone.

Cisco (NASDAQ:CSCO) reported tonight and is selling hard in the after hours. Also, the euro put in a topping pattern yesterday and should see more selling. The bulls will need to step up and support today's lows in a hurry. Tomorrow will be a defining session.

Volume has picked up and price continues to decline, but the indices are nearing our support levels.

The indices are in trouble if we cannot hold near the session lows. SPX broke its 50-day moving average, but is holding the 200 DMA. RSI 50 has now been lost, but 1085 has held. The Nasdaq has some room left to decline, but should find support near 2,200. The index, much like the rest, lost 50 RSI and the 50 DMA. Unlike SPX, the Nasdaq lost the 200 DMA, which is not a good sign for tech stocks. The Russell looks the weakest. Notice it has not taken out those June highs AND it didn't make a higher high this week. Also, it gapped down through 50/200 DMA price support. The USO needs to hold the gap up from last month. As long as $35 ish holds, crude oil is alright.

Watch List

Our watch list was lower today, similar to the market.

We updated our bearish watch list now that a market collapse is definitively back on the table. Leading the way lower was our top shorts in solar and Capella (NASDAQ:CPLA) in the for profit education industry.

Disclosure: None

Source: Beatdown Wednesday: Why It Was Neither a Big Deal Nor a Surprise