Before jumping to any conclusions about today (like whether or not it’s the beginning of the end, or if it’s nothing but a motivation to go “all in” tomorrow), I want to show you a chart that should offer up some perspective.

Readers who’ve been around for a while will know our strategy is longer-term in nature, but we choose to use peaks and bottoms as entry and exit points. Those nickels and dimes add up, and if you win enough battles, you’ll eventually win the war.

I bring the analogy up to reiterate that one bad day for stocks is a battle…. not a war. For that matter, it’s not even a complete battle.

The chart of the S&P 500 below plots some pretty clear - and pretty reliable (so far) – trend lines. As you can also see, the S&P 500 was also pressing its luck with the recent push into the upper edge of this bullish zone. Well, its luck ran out today.

From here, the S&P 500 could (dare I say ’should’?) fall back to 1090 or so, where the lower edge of the zone, or support line, is. Maybe it will fall right under it. Maybe it will bounce off of it. Or, maybe it won’t touch it at all. Based on history and odds though, I think we have to be realistic about out expectations….. both good and bad. Bull trends have survived worse, and not that long ago either.

Today is just the first day of a battle that’s favoring the bears. The bears could win a few more days, and it still wouldn’t break the bigger-picture uptrend. … and that’s the war we’re more interested in. In fact, losing the battle could be a good thing, by giving us a chance to pick up some stocks on the cheap.

Just some perspective.

S&P 500 - 1/12/10