Some will consider 01/21/2010 (11:39 A.M. EST) the moment the White House declared 'War on Wall Street.' Others will remember it as the day the government declared its Independence from Wall Street.

A new policy announced by President Obama  is being called Glass Steagall 2.0, but the architect is former Federal Reserve Chairman Paul Volcker and the President refers to it as the Volcker Rule. It marks an abrupt policy change in Washington away from Treasury Secretary Geithner’s accommodative stance toward real reform.

As a result, the market finally put in two days of back to back losses, the first time that has happened since late October. Sellers took the market down to Hades in the morning and kept it there.

Will the market collapse from here? Maybe. We will learn something about the nature of the bulls on the next rally, which could start soon. If it falters and reverses, then some of the technical, fundamental and sentimental vulnerabilities will begin to become more meaningful. We have already reviewed the long-term technical picture.

Fundamental guidance has been ambiguous. During the JP Morgan conference call last week, CEO Jamie Dimon was asked whether anything was in the way of JPM raising its dividend? He answered, “We really want to see a real recovery before we do that, just in case you have another dip down.” When asked by analyst Mike Mayo whether nonperforming assets (bad loans) would decline by mid-late 2010, Dimon stated, “Well, Mike, we don’t know when the recovery is.” If JPM does not know, nobody knows.

Sentiment has also become very bullish, which is a contrary indicator. Last week, the Investors’ Intelligence Survey posted a four-year low in bearish sentiment. So naturally, market conditions are more bearish now, but the real test will be the nature of the next rally. If it is strong, then the market will still has a chance to make new highs, assuming sentiment turns bearish very quickly.