What a day! It was bears all the way. For a while, it seemed like the financials (read GS) would make it another frustrating day for the bears, but the BAC news was the final nail on the coffin....at least for the day. However, one swallow does not make a summer and that's what makes tomorrow such an important day. That said, a lot of momentum stocks got badly hit today, take the solar stocks for example. Even if the markets do attempt to rally, I would avoid these stocks for a while unless you are a day trader. Let's have a look at the important levels on S&P.
Early in the trading day, I had put up a chart emphasizing the importance of the 1167 level. The BAC news finally caused this support for the index to break down, thus making it the new resistance. The feeble rally by the bulls late in the day was thwarted at this very level. So, this would be the first level to keep an eye on tomorrow.
I also expect there to be support at MA(20) - 1156. I don't think the bears will find the MA(20) level easy to break. And of course, then comes the grand daddy of all supports - 1150.
To wrap things up, there is a lot of underlying support for the bulls. However, I think it is best to enjoy this battle from the sidelines. The pullback here might last longer than the previous ones in this rally.
Take care and good luck!