Serge Berger is the head trader and investment strategist for The Steady Trader. Sign up for his free weekly newsletter.

Yesterday’s market crash ended with the S&P 500 down 6.66% (scary number, right?) after slicing through just about every last support level left. If it wasn’t clear enough at the end of last week, it certainly should be obvious now: The quantitative easing fun days of blindly buying risk are over, charts are broken, and sell-the-rallies mode is back on. 

However, we have now reached serious short-term oversold levels that should lead to a rally of a few hundred basis points very soon. 

For example, yesterday’s NYSE Advancers/Decliners was at -3,064, something that rarely happens and which shows that almost all stocks on the NYSE closed down for the day. Looked at it in a different way, according to SentimenTrader.com, yesterday’s trading session had the worst market breadth since the 1940s, with 66 stocks down for every 1 up.

The aforementioned S&P 500 index now even broke the 61.8% Fibonacci retracement level from the September 2010 to May 2011 rally. This simply means that all support levels are gone and rallies must be sold.

How far can a light relief rally go? Given the magnitude and velocity of the sell-off over the past two weeks, it makes it more difficult to target a specific level, but 1,200 is a logical first target to look for. If and when we should get there, we can reevaluate for next targets. On the high end, 1,250-1,275 might be reachable if the bulls manage to squeeze the shorts good enough.  

The CBOE Volatility Index (VIX) yesterday rallied almost 50% and closed at levels not seen since 2009 on a closing basis. This, too, shows that a near-term breather rally should be just around the corner.

Where did investors go to hide their money during yesterday’s sell-off? Besides throwing more money at the vertical chart of gold, investors piled into U.S. Treasurys despite the rating downgrade. (As a side note, does that now officially disqualify the S&P rating agency?)

And that’s about all there is to it. On horrendous risk off days like yesterday, there actually isn’t a tremendous amount to talk about because most stocks did the same cannonball move. Once a breather rally gets underway, we will again be busier measuring targets. But the signal is now clear: Rallies need to be sold into as a function of healthy risk management while sell-offs such as yesterday’s can be bought for quick tricks.

• See Sam Collins’ Daily Market Outlook: Why We Haven’t Seen the End of This Sell-Off
• See Sam Collins’ Trade of the Day: A 9% Dividend to Help Ease the Market Pain
• See Serge Berger’s Trade of the Day: One Sector Worth Going Long