You won't have to look long or hard to find carnage wherever you turn with those high pole stocks, meaning stocks that have run up straight with hardly a pullback for months. They're all over the place, and we warn you to stay away from them daily. Not only have they run straight up, but many of them have incredibly high PE's that are simply unsustainable. 100 PE's and sometimes 200 or more. Stocks such as VMware, Inc. (VMW), Equinix, Inc. (EQIX), Salesforce.com (CRM), and F5 Networks, Inc. (FFIV) to name just a few of the carnage hits today.

You never know when those stocks are going to take a massive hit, thus, the lesson here is simple. Stay away from them as much as possible, even though they are without question, the sexy stocks of the world. You always feel bad when you miss them going up every day, but the rubber band always snaps at some point. And when it does, it gets very bad very fast, and thus, you always have to be on guard if you do get in. Keep stops very tight and hope you don't get caught on the gap downs that took place in a few of them today, especially EQIX. That really is a sad story for anyone involved, and can happen at any time when your PE is in the clouds.

That's why it's best to always think of this game in terms of singles and doubles, and lose the home run mentality, as it often leads to bad news. We all make the mistake of going there once in a while but maybe the ultimate lesson is don't go there at all unless it's super compelling. Even then you have to tread slowly. The rubber band snapped in a large way today and this may have very short-term ramifications on the S&P 500, making it through 1160. More on that in a bit. Bottom line is the action on the Nasdaq was terrible today, due in large part to the big swoons down on the high pole stocks. The rest of the market held better.

When the high pole stocks finally snap it can often take some weeks before all the selling is done. These high pole stocks have been the best leaders throughout this rally. At best they need to get oversold and then form some type of handle to build back off of. Now, there is the possibility that they've seen their ultimate tops, and that will make things more difficult for the bulls going forward. It will require a new set of leaders to step up and keep things going to the upside, or the market will simply pull back in its current trading range.

Another test may be needed down to 1131, or possibly lower before the market try's once again to make it through 1160 on the S&P 500. We all know how tough this level is, and it will not be easy for the bulls in terms of getting through. The bears attacked the high pole stocks and got what they needed short-term. The battle will continue in the days ahead.

On the positive side of things, many Dow stocks performed very well such as (MMM) and General Electric Co. (GE). Great moves that show us there are still stock leaders out that can take over if need be. They'll need to if this market is going to break out short-term. This market is not dead because of the snap in many stocks today. Some of them are now at, or very close to. 30 RSI's on their daily charts with stochastic's falling below 20. They will get support shortly.

It feels really bad when these stocks get hammered, but there are a lot lower PE stocks, such as the two I just mentioned, that carry heavy weighting, and thus, the market is far from dead, although it probably feels that way to many. The financial's and semiconductor stocks continue in mostly bullish patterns for now after lagging for quite some time, so don't give up just yet if you think the S&P 500 can take out 1160 in the near future.

Lots of great bases continue to set up all over and that's a good sign. Now, it is possible that these good base set-ups can reverse down, and that's the end of it. The long-term down trend line being the top, and that's all there is folks. The bears have the burden of proof here in taking away and eliminating these base set-ups. It can be done, of course, but the bulls have the patterns.

Now the bears need to do damage so as to crush the hearts of the bulls. If these pattern set-ups become continuation patterns in the end, the market will break out. The oscillators are not bad at all, but some daily index charts are a bit overbought. We could sell back down a bit and then try again, but it is relevant to recognize that the patterns overall remain bullish on the daily charts. It's still all about 1131 to 1160, with 1113 now the line in the sand along, with 1115, or the 50-day exponential moving average. Day to day here.

Peace,

Jack

Jack Steiman is author of SwingTradeOnline.com ( www.swingtradeonline.com ). Former columnist for TheStreet.com, Jack is renowned for calling major shifts in the market, including the market bottom in mid-2002 and the market top in October 2007.

Mr. Steiman's commentaries and index analysis represent his own opinions and should not be relied upon for purposes of effecting securities transactions or other investing strategies, nor should they be construed as an offer or solicitation of an offer to sell or buy any security. You shoul

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