The Dow Jones Industrial Average closed yesterday with a 7900 handle, 7997.28 to be exact. It marks the first time these levels were closing levels for the index in over 5 years (almost a full 50% down from the peak of a 14,000 handle just recently set a year ago, in October 2007).

Chart technicians are on both sides about what all this means.

I think its important to point out price action on another closely watched index full of widely held stocks, the Dow Jones Transports Index, which made a fresh low during this sell off. This is suggestive that today we will likely see that same action more broadly. Transports led us through the commodities moves on both sides, which have been nearly dead-locked with the market, in a state of stair-stepping deflation.  Trading volume has also wound down dramatically.

These are not indications of re-valuation of the market, nor are these indications of price re-entrenchment.  These are not indications of capitulation.  These are indications that the US equity market is about to change its tone dramatically.

The final destination of this market, after its traded down, washing out perhaps hundreds of thousands of new investors in hundreds of varied positions, is not excitement.  It is not a psychology of buy & hold. And it is most certainly not a market psychology which leads to rebounds. This market will trade into such low volume, continually taking out players, vaporizing capital turned equity, only further removing opportunities for uptrend trading.

In the end, the action will go side ways as the whole market becomes apathetic. And while all historical indication tells us that we have a green light in a Bull market, a red light in a Bear market, a sideways market has only one indicator and it hangs brightly now over the door: the exit light.