So the good news is that we know we are in a correction and not a new long-term downtrend. The unfortunate news is that this correction may only be about two-thirds over. The low today (so far) for both the S&P 500 and Russell 2000 is at significant support, but the NASDAQ Composite's current support is much weaker.

You can see from the first chart of the NASDAQ Composite how the index broke through one of our support lines today. This is common when the market becomes more volatile. Often our support lines will be broken, only to have the index rebound. Horizontal support is much less effective in downtrending markets and volatile markets. Even so, they are still a good tool to possibly measure how far the fall will go.

If the NASDAQ breaks below today's low, a break of the 200 day moving average is almost a given. Next, the index will likely fall to 2475. Further weakness could bring the index to the 2400 or 2350 support areas. We have used Fibonacci retracements on the chart to show the possible conclusion of this move, assuming that the small consolidation that happened the last few days was the halfway point of this fall. 2447 was the conclusion.

The S&P 500 looks much healthier as today's low is at very powerful support. A break of 1440, should bring the index to the 1412-1420 area, followed by a possible move to 1380. We used Fibonacci retracements on this chart as well to use another method of finding the end of the current correction. 1392 was the conclusion.

The Russell 2000 has been hit very hard this correction. The next level of support is very powerful and is the 760 area. 740 and 720 are the next major support levels.

Even though this market could continue to be ugly for a couple of weeks, our system was not even close to being overbought when the indices were climbing. Therefore, we believe that we are clearly in a correction and that we will just need patience in the coming weeks. With the S&P 500 and Russell 2000 at important support, there is a small chance that the market could bottom here, although this is unlikely.