We're at an important crossroads

I'm going to use the IWM as an example as it looked/looks the strongest.

 Here's the 1 min chart showing a positive divergence, earlier this morning I warned the market was way oversold on an intraday basis and we could expect to see a relief move, thus far it's in line with price and not turning negative.

 Here on a 10 min chart we have at least 3 days of accumulation that was starting a new up cycle, that was disrupted as I've shown you in several charts today and on Friday, it's obviously because news of the S&P downgrade was known on Wall Street Friday. However as I talked about last night, very rarely are cycles interrupted and just head down, there's too much money at stake in setting them up. So like the CAT trade I posted, the question that only the market will answer and I'm not sure the market even knows how to answer this one yet is this, do they lift the market back up and try to salvage what they can of this cycle or is the market now so fundamentally damaged that you have fear on Wall Street? A bad close today and a big day down tomorrow would suggest they lost control of this one, I'm not ready to endorse that idea quite yet. I think much like the CAT trade posted, they'll try to salvage some of this last cycle. This can be done a couple of ways, it's lost money that they need to replace, how they replace it can happen several different ways.

First they can lift the market, maybe by propping up some good earnings report or a Fed announcement or whatever catalyst is available and just run the market back up through the gap and try to finish the distribution side of the cycle into higher prices. They could also run it up a bit and get VERY short and drop the market. Like I say to people all of the time, just because you lost money in trade "A" doesn't make trade"A" the best place to make it back. In either scenario it would seem to me they need to at least fill the gap and then probably some.  Intraday I'm not seeing heavy distribution suggesting they just decided to go short here and let the market fall, although there are rare circumstances like the S&P downgrade in which they have little control.

Here's another view of the cycle started with no apparent "Cycle related" distribution, just the leak from Friday

Here are the 1 min charts of the other averages

 The DIA looks bad on this 1 min (large caps), but not so bad on a 5 minute.

 The Q's are better then confirmation here.

As is the SPY.

I would think if there was a fairly certain fear on Wall Street that they've lost control, we'd be seeing a lot more negative looking charts. Unless we see something really nasty toward the close, my guess is they try to salvage what they can of the last cycle that was in effect; that may cause it to be shorter then originally planned, but it also gives you the chance to let the trade come to you.

If tomorrow (and I don't see a high probability of this right now) the market falls apart, then the entire game changes and Wall Street would be in a position it's rarely in. So for now, my vote is that they'll try to regain today's lost ground. If that happens, then we'll have to see if they intend to continue with the original plan or if they will modify it by shortening the cycle (we'd see pretty heavy distribution) and try to make up the rest on the downside.