The market voted on what it thinks of Obama winning last night's election. Four more years. Market is saying it wanted Romney for those four years. You never argue with the message of the market. My feelings are being left out here totally. Anything I say has to do specifically with the market. Again, not me but the market. Want to make it clear because I have my own thoughts that have nothing to do with the market. Bottom line is the market wanted a pro-business president. It got none of that. It wanted a president that it felt could stimulate business. The market wanted large business tax breaks to try and create new jobs. It wanted nothing to do with more debt. That's its message. I am surprised I have to admit by the size of today's drop, but it is what it is. The market had clearly, now in hindsight, been holding up thinking Romney had a great chance to win. The market got it wrong. So today we saw a gap down.

Interesting in that early last night the futures were down 117 points. This morning they were slightly green. It seemed as if the market was indeed fine with the election results. Suddenly at 7 AM Eastern Time the futures sank well over one hundred points in a matter of minutes. The down side was under way. We gapped down and never looked back. A very nasty technical day as the Nasdaq closed below the 200-day exponential moving average. The S&P 500 is still well above. Not good to see the Nasdaq lose it though, and doing it on very big volume and very poor breadth. Not the way the bulls wanted to be losing such important support. It can always come back, but again, not the way you want to lose support. The gap down is huge and we closed well below that gap, so now it gets even tougher for the bulls. In the end, when looking back at today's action, the market spoke. It spoke that it wasn't happy. Simple as that. No emotion tied to it. Just being what it is. The market said it wanted Romney. It's disappointed to say the very least. The result being a very bad technical break that can't be ignored.

Up to this point we have not seen any of the characteristics of what may be the beginning of a new bear market. We saw one today, but it's only one day. You cannot make a decision based on one day's worth of action. Also, the volume increase comes from a very special situation. You only get a new president every four years, so it was an emotional day, thus, you can cut the market some slack. That said, it would be a mistake to totally dismiss today's volume. It was huge. It needs to be watched carefully. This type of increasing volume becomes more of a trend. If it does, the red flag goes way up. The other characteristics are extreme sentiment on the bullish side. Often this means 35% or higher on the bull-bear spread.

Extreme bullishness is a reason for markets to collapse. The other thing to watch is how good news is handled. When you're transitioning into a bear you often see good news ignored and sold off. We're not seeing that, and we're not seeing too much bullishness. This doesn't mean we can't be starting a new bear. We can be as sometimes the wrong news can be too overwhelming. However, it's way too soon to say things are falling apart. The S&P 500 is still way off from even losing its 200-day exponential moving average at 1375. If that were to go away with force, that would be another huge red flag for the market. While we can be transitioning into a new bear, there aren't the usual classic signals at this point in time.

Look folks.... just because today was terrible doesn't mean it's all over for this market. The focus now goes towards looking at how the fiscal cliff situation gets handled. Both sides need to work together to get this done without the country moving into a deep recession. Have any lessons been learned from both sides? Probably not. Sorry to be so untrusting, but they've shown their colors plenty of times. The nonsense never stops. They need to get their act together quickly.

If things don't get done and we head into a recession you can kiss this market so long. It will get hit very hard to the down side. No way to know just how bad but the story for now remains the same. Neither side is looking to work well with the other side. You have to throw your hands up in disbelief. Let's hope smarter minds prevail over time to prevent recession and all the bad things that go with it for the good folks of this country who have been through enough, if you ask me.

So if we use the S&P 500 as the market proxy, we look down at 1375 where the 200-day exponential moving average lives. The Nasdaq has already lost this key moving average which stands at 2955. It's not a bad loss at all and can come back in a heartbeat. The real key is looking at S&P 500 and 1375. It's not a shock that the Nasdaq would lead down first as, let's face it folks, this is where true froth lives. It's important that the big money that rules this market holds onto its lower P/E higher dividend stocks. If they give up on those stocks it tells us that something more negatively biased is at hand. That would be the moment in time when the bulls would need to get very worried. In the meantime, the market spoke today and said it didn't like what it saw. It showed its first red flag in volume. But it's only one day. Much will be learned in the days ahead, but in the short-term there's a lot of damage technically. The Nasdaq needs to get back above 2977 or today's high to get things to look better technically. That would only be step one. Then it would have to clear the gap down top from yesterday's low at 3000.

The road is a tough one from here for the bulls folks.

Peace,

Jack

Jack Steiman is author of SwingTradeOnline.com ( www.swingtradeonline.com ). Former columnist for TheStreet.com, Jack is renowned for calling major shifts in the market, including the market bottom in mid-2002 and the market top in October 2007.

Mr. Steiman's commentaries and index analysis represent his own opinions and should not be relied upon for purposes of effecting securities transactions or other investing strategies, nor should they be construed as an offer or solicitation of an offer to sell or buy any security. You should not interpret Mr. Steiman's opinions as constituting investment advice. Trades mentioned on the site are hypothetical, not actual, positions.

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