Monday's harsh selloff sucked tons of capitalization out of the indices, especially the instantly emaciated

Nasdaq Composite Index

and

TheStreet.com Internet Sector

index. But that's history, and Wall Street's focusing now on what happens next.

At Monday's close of 2345.61, the Nasdaq was down 9.7% from its April 12 high of 2598.81. The 10% level is the Street's casual benchmark for a nice, healthy correction, but anything beyond that and things are looking kind of hinky.

The

S&P 500

was holding up better, off 5.1% from its April 12 high of 1358.64 at Monday's close of 1289.48. But that's closing in on an uncomfortable level of its own, said Robert Robbins, market strategist at

Robinson-Humphrey

in Atlanta.

"One of the things to watch is the 7% mark, 7% off the all-time high of the S&P 500," Robbins said. "Corrections tend to stop in the 7% area, or the 10%. I've been saying we could have a 4 to 7% correction, and it's already 5%.

"If it doesn't rally

today you're going to see a real serious selloff where you're going to start to see even retail-investor margin calls," warned Robbins, who in early December correctly

forecast the

Dow Jones Industrial Average's

April move through 10,000.

Also important for stocks and indices is the 50-day moving average, which the S&P stopped just short of piercing yesterday. The Nasdaq Composite and the large-cap

Nasdaq 100

slammed through their 50-day averages yesterday, while the Dow remains nowhere near that point.

Oversold Doesn't Mean It's Over

"It's a tough call here," said Charles Payne, president and chief analyst of

Wall Street Strategies

. "I would say just on the surface here it's easy to say some of these stocks are oversold, but they can be oversold and still go down.

"Take a stock like

AOL

(AOL)

, for instance," he went on. "You look at what it's given back over the last week, and it's a lot. But if it doesn't firm up soon, it could be vulnerable to another 20, 30 points on the downside." AOL yesterday lost 23 7/8, or 17.1%, to 115 7/8, but it's only back to where it was less than a month ago.

Such large tech bellwethers, trampled in the furious rotation toward cyclical names, will be one key to deciphering the market's near-term course, Payne said. "What would be good is if you could have a stock like

MCI WorldCom

(WCOM)

close the session at the high of the day," he said. "If that sort of thing starts happening again, maybe you can say the worst is over."

Payne's watching certain levels on the Nasdaq Composite as another indicator. "I would think that

things were improving if if Nasdaq was able to firm up this week and not erase all the losses they've had this week but at least get it to the point where it's above 2450," he said. "On the flip side, if it continues to go down, the next support point we're looking for is 2200."

Major earnings reports, such as

Microsoft's

(MSFT) - Get Report

third-quarter release today, will take on even more importance in this environment, Payne said. (A full

calendar of this week's expected S&P 500 earnings reports is available on

TheStreet.com

.)

Cyclicals' Sun Could Be Setting

A signal characteristic of yesterday's action remained the outperformance of cyclical stocks and other value plays, compared with heretofore-dominant growth stocks. The

Morgan Stanley Cyclical Index

gained 1.8% on the session, setting a new all-time high of 583.79, while the

Morgan Stanley Consumer Index

slumped 1.1%.

"This is not sustainable," Paul Rabbitt, president of

Rabbitt Analytics

, said of the cyclical move. "The only thing that might drive it forward is the unlikely event of a rate cut or some Fedspeak that gives us some indication that the

Fed

might ease." Rabbitt said a continued downturn in stocks could get the Fed talking about an easier monetary policy, but he stressed that he doesn't really expect that.

A continued, sustained equity selloff is itself unlikely, Rabbitt said. "Normally rotation occurs in bear markets, which leads me to believe it's more of a knee-jerk reaction than a permanent change in leadership," he said.

Frank Gretz, market analyst at

Shields

, is more convinced that the sudden shift in leadership has thrown the market into a painful transition period. He said the next couple of weeks could get "kind of messy."

Staff reporter Brian Louis contributed to this story

.