Believe it or not, there was some good news yesterday: New claims for unemployment benefits dropped, there was an improvement in the leading economic indicators for the fourth consecutive month, and U.S.home prices increased in July for the fourth straight month. But investors ignored the good news, and in a rush for the exits sold off stocks, bonds and commodities as fear of a global recession gripped the markets.

Wednesday’s statement by the Federal Reserve that there were “significant” downside risks to the economy and “strains” in global financial markets triggered massive fear among investors. And as sell orders mounted, margin calls fed more liquidating orders into the stock and futures markets.

All three major U.S.stock exchanges fell by more than 3%. Volume increased to 1.7 billion shares on the NYSE with decliners outpacing advancers by over 6-to-1 on both the Big Board and the Nasdaq.

Yesterday’s massive sell-off resulted in a serious violation of the S&P 500’s seven-week-old bear flag confirmed by a failed test of the 50-day moving average. The bears are almost in complete control of the market, and global fear has struck virtually every major exchange in the world.

Technically the bears have just two seemingly minor, but important, barriers to overcome: the closing low at 1,120 and the absolute low at 1,101. If both lows are broken, the S&P 500 should plunge to the next support at last summer’s trading range of 1,045 to 1,100. But even in the unlikely event that the bulls hold onto these two technical levels, trading will probably be confined to a narrow range for many months.

This chart of the broad-based NYSE Composite tells us that there is almost no hope for the bulls. Yesterday’s total demolishment of support that contained two important reversals is devastating, and the stochastic is flashing a strong sell signal. A bear market is confirmed.

Many investors were shocked by the apparent breakdown of gold. But when a massive sell-off of stocks occurs, virtually all other assets are impacted. Margin calls must be met and so the most liquid and often the most profitable assets are sold first, thus the strong selling in gold. The SPDR Gold Shares (NYSE:GLD) will most likely fall even further, but support begins at just under $165 and new positions could be considered in the support zone of $155 to $160.

Conclusion: Yesterday’s massive sell-off concluded with bargain hunters snapping up some blue-chip favorites just before the close. Therefore, there may be a rebound today and another opportunity to establish new short positions.

A “dead-cat bounce” could even run the S&P 500 to the broken support line at 1,150 (Dow 11,000), so don’t be too quick to establish new shorts despite the overwhelming evidence that the bears are now in charge. Overconfident bears often die young, so pace your next round of shorts.

Today’s Trading Landscape

To see a list of the companies reporting earnings today, click here.

For a list of this week’s economic reports due out, click here.

• See Serge Berger’s Daily Market Outlook: The Market is Headed Lower, But When?
• See Sam Collins’ Trade of the Day: Bail on This Weak Semi Stock Now