I recently said that the S&P 500 had a chance to make a very important statement about the 944 level, one way or another.

As everyone saw, 944 gave way, and we had a dramatic test of the 850 support level last week, and on November 20 the S&P closed at 752.

We've been in this "on the edge" market for weeks now, but last week's three-day decline that took another $1 trillion off the total market capitalization gave us a clear indication of the direction of the next leg of this very volatile market.

The S&P plunged below 850 on the "terrible news" of the imminent bankruptcy of General Motors (GM). If we're caught in another down leg, it almost certainly will be the final one of this bear market and will not last very long. It could be deep, especially if the Dow breaks 7,773—its intraday low on October 10. (See also: "Yield Hog Alert: Buy GM Bonds.")

The good news: Although this final down leg could be sharp—perhaps sending the Dow to its October 2002 bottom at 7,187—it all may happen in as little as one week.

Between October 13 and November 13 we had the three biggest single-session Dow Jones Industrial Average point gains on record…