Stocks suffered an ugly day of losses across the board. The selling was accompanied by big volume, with NYSE volume jumping 42% and Nasdaq volume up 22%. The selling was broad based, with 194 out of 197 industry groups down at least 1%. With well over 800 stocks dropping 4% or more on heavy volume today, it was the worst day we have seen this year in terms of individual stock damage.

With the S&P 500 and Nasdaq Composite failing recent breakouts, along with the Russell 2000 and S&P 400 breaking down below the 50-day MA, our system for stock market timing shifts back into "neutral" mode. As with the last sell signal, we will have to see how stocks react over the next few days to determine if the rally is dead. If leading stocks and major averages follow through to the downside within the next few days, then the model will be forced in to sell mode.

This has been one hell of a tough market since late February...very challenging to say the least. The key to mastering any trading system is to continue to trade in the same manner week in and out and learn from mistakes. Switching styles after a bad run of trades may result in short-term results or happiness, but over the long run, those who stick with one system and learn it in and out will eventually be rewarded.

For now, there are no new ETF or stock trade setups we are targeting for entry today. Our overall plan it to sit tight and manage existing positions, as well as monitor leading stocks and major averages over the few days. Further downside from current levels could force the model in to sell mode, with the market potentially correcting for several weeks.

Deron Wagner is the Founder and Head Trader of both Morpheus Capital LP, a U.S. hedge fund, and MorpheusTrading.com, a trader education firm.