Heavy selling pressure kicked in during the first hour of the session and the market never recovered. The Dow Jones Industrial Average (DJIA) tried to claw its way off its lows but that effort failed in the final hour. We end the session with a loss of 248 points. The S&P 500 (SPX) and Nasdaq Composite (COMP) each lost more than 3% while the Russell 2000 (RUT) was down over 4%.

The sector graph shows there were few places to hide from the selling. The iShares Treasury Bond (TLT) ended as the only advancer. The AMEX Pharmaceutical Index (DRG) and streetTRACKS Gold (GLD) posted the smallest losses but still dropped over 1%. Many groups lost over 4% with the PowerShares Clean Energy ETF (PBW), Oil Service HOLDRS (OIH), and Amex Networking Index (NWX) among the weakest.

One fact worth noting about today's drop is that it pushed the broad market indices toward oversold readings. The short-term RSI on the S&P 500 (SPX) ticked to 32 while Dow Jones Industrial Average (DJIA) dipped to 29. These are the lowest readings since the November bottom. The Nasdaq Composite (COMP) and Russell 2000 (RUT) aren't quite as low but are getting close.

While short-term oversold readings can signal a short-term bottom it is important to understand the risks. For example, the Dow hit an oversold reading near the mid-point of last September. A quick glance to the daily chart below shows that was not an "all-clear" signal. For those interested in studying the behavior of this indicator more closely, you can click here, to find a large chart of the Dow with the RSI.

Earlier this morning I noted that the Dow Jones Industrial Average (DJIA) broke the short-term support I had been watching. As I said, this now becomes upside resistance.

As far as the daily charts go, I added a short-term resistance zone (narrower grey lines) to highlight how the trend is evolving. Now that the uptrends have been broken, we are left with a situation that looks more like a sideways range. The November bottom marks the lower boundary and the recent peak defines the top end. I will delete the red trendlines tomorrow but left them in to show how the conditions have changed. And that is where I will pick up in the morning. Have a nice evening...

Chart Courtesy of Thomson Financial

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Charts Courtesy of Thomson Financial