Breadth across the three major exchanges has turned heavily negative in the past few weeks, and now new lows are consistently outpacing new highs by a factor of three to one. 

There have been some new highs for a handful of consumer staples makers like Colgate-Palmolive (NYSE:CL), but it’s the new lows that are really interesting. Take a peek every now and then, and you will see what wholesale destruction is occurring to some of the biggest and formerly most respected companies in the country.

Take Bank of America (NYSE:BAC) — please! No really, wow — butchered does not even begin to describe what has happened to this company.

In the mid-2000s, as low interest rates sent Americans on a home-buying spree, BAC went on an acquisition spree of its own, buying FleetBoston for $47 billion, credit card goliath MBNA for $35 billion, U.S. Trust for $3.3 billion, LaSalle Bank of Chicago for $21 billion, troubled mortgage originator Countrywide Financial for $4.1 billion and near-collapse Merrill Lynch at the height of the financial crisis for $50 billion.

Try to add that up, and even a polydactyl will run out of fingers and toes. That is one whopping huge company, bigger than big, ungodly huge, immensely — well, you get the picture. Who could possibly run a business that size profitably? The answer, quite obviously, is nobody, because this is company is one sick puppy. The race to get bigger has absolutely destroyed value over the past five years to an extent that is simply mind-blowing.

And after all those buyouts, all that private jet travel, all the high salaries paid, the company had the audacity to take a $45 billion bailout from the federal government. And then after all that, it has had the opportunity to borrow at less than zero and shore up its balance sheet by buying bonds and sucking down the interest rates, essentially for free.

And after all of that, what? Nothing but further value destruction, broken promises, carelessness and poverty. If you want a poster child for what was wrong with the buyout spree permitted by the Federal Reserve in the 2000s, and what is wrong with growth at all costs, then Bank of America is your company.

And the sad thing is, here we are, 30 months removed from the last bear market, and this titan of American finance is making new two-year lows. It is now trading for less than at any time in 2010, and if you skip the worst of the credit crisis of 2008 you have to go all the way back to 1995 to find the last time that it traded at the equivalent of $10.50.

At one time, America’s largest bank – now, a hulk of a shell of a glimmer of its former self. And quite obviously with no path back to health as it crashes to new depths, with a single-digit stock price not far away.

I’ll tell you something: Financials and techs are supposed to lead rallies in the stock market. They are supposed to be two of the things that Americans do best — plan and bet and lend for the future, and innovate new products to make the world a better, healthier, more enjoyable place to live and work. 

But right now we have Bank of America embarrassing itself and our country with one lousy restructuring plan after another, and we also have the tech-laden Nasdaq 100, which has fallen all the way back to the two-year trend line that has held in every one of the worst declines of the current bull market.

To get to this juncture, many large tech and consumer stocks on the Nasdaq have completely broken down. The names of the wounded include Cisco Systems (NASDAQ:CSCO), eBay (NASDAQ:EBAY), Google (NASDAQ:GOOG), Research In Motion (NASDAQ:RIMM), Akamai (NASDAQ:AKAM) and Broadcom (NASDAQ:BRCM).

It makes you wonder, what the heck went wrong to bring us to this stage?

It all goes back to the tech bubble of the late 1990s, presided over by former Federal Reserve chief Alan Greenspan. The tech bubble blew up, and left the economy in tatters in the early 2000s. The Fed sharply cut interest rates to help get businesses going again, and that had the accidental consequences of allowing people who had come to hate stocks to borrow money easily and buy houses cheaply instead.

You know what happened next: new bubbles that this time almost killed the banks. And what was the next result? The Fed tried to straighten things out with another round of super-low interest rates, and since then we have had a two-year advance fueled by that cheap money.

But where has that really gotten us? Nowhere. Companies hoarded the money to shore up their own balance sheets and pay their execs big salaries. And they have not helped the backbone of America — workers, parents, families — by expanding and creating jobs. Even worse, they have not been forced to do so by a government that diverted all those bailout funds from the public in the first place.

And now we are stuck. Banks are out of money. People’s wages aren’t rising. And the only thing the global finance industry can think to do is bail out one more organization that blew all of its advantages — this time a sovereign government, the Greeks.

Somewhere, sometime, this crazy merry go round has to stop. 

The main problem is that at every step along the way, the U.S. decided to preserve the old system rather than clean it out and start fresh. Now we have more debt than ever, we have even more need to keep interest rates low to service the debt, and that means capital continues to be misallocated. 

Lacking any good alternatives, you know what the next step has to be. You just know the Fed is going to have to reflate the economy one more time by ginning up a program that will look suspiciously like a third round of quantitative easing, though they won’t call it that. They will say it is aimed at restarting residential construction and jobs, but the fact of the matter is it will be one more exercise in futility. It’s like the old story: When all you have is a hammer, everything looks like a nail.

The investment angle on all this ought to be pretty clear. Ultimately, the U.S. and Europe are not going to be much different than Greece. They will require constant bailouts and restructurings. But most likely things have to get worse first.

Right now, the market is incredibly oversold, and sentiment is beyond terrible. This is the type of condition in which you either get a crash or a sharp rebound.

With interest rates at zero, valuations cheap, companies flush with cash and the government in the habit of bailing out the market with asset purchases, a crash scenario does not seem very likely.

My expectation: There ought to be a summer rally lurking around here somewhere. You do not want to be strategically short stocks at these levels so close to the support we have been looking at. 

But if the bounce does not manage to generate any 90% upside days, and stocks fail to get back over the 1,300 level of the S&P 500 Index by around mid-July, then we should prepare for a tough set of weeks in mid to late summer and well into October.