By Ann Sosnowski

What a worrisome day for American stocks!

The Dow Jones Industrial Average is down triple digits today, showing a drop of 140 points. This is already a correction of 1.82% from Wednesday's high.

Additionally, the Dow Jones Transports are down nearly fifty points on the day… after still failing to hit a new lifetime high.

As Dow Theory purports, a bull market only exists if both the Dow Jones Transports and the Industrials break past new highs. Therefore, this breakdown on both averages isn't exactly a correction in a bull market, but rather a cyclical downturn after an overextended rising leg of a once-flat market.

So why is the Dow being punished so badly? One reason is because the dollar is down for the fourth straight day in a row. $1 is now worth only 0.76 euros, as compared to early November when $1 bought 0.80 euros. So international investors have calmed down from buying.

Additionally, the retail sector, as I had theorized last week, is now being plagued by doubt when it comes to the remaining holiday season.

Wal-Mart Stores Inc. (WMT:NYSE) announced that its same-store sales were down a simple 0.1%. Regardless of how miniscule that decline is, it's one of only two instances in the last 27 years that WMT has reported a loss in that area.

On Monday, November 20 I told you the following:

“Wal-Mart Stores Inc. (WMT:NYSE) was severely overbought a few days ago, and looks like it will run flat above the 200-day Moving Average. In fact, WMT usually runs flat or corrects cyclically between December and the beginning of January.”

Since the 20^th, WMT has indeed run flat and is now back down to its 200-day Moving Average at $46.74 per share.

As the second-largest component of the Retail Service HOLDRs (RTH:AMEX), right below Home Depot Inc. (HD:NYSE), WMT's weakness is taking a toll on the RTH.

Today, the RTH retraced a whopping 1.28%. I've been telling you over the few weeks that retail was in for a cyclical drop going into first quarter earnings. And overall retail sales for the weekend were mixed, making investors less optimistic about sales.

It's true that overall retail sales for Black Friday were good, in part because more stores opened their doors between midnight and five a.m. than they did last year.

According to the National Federation of Retailers, 140 million shoppers spent, on average, $360.15, up 18.9% from the year before. Early estimates anticipate total sales of $8.96 billion, up 6% from the year before.

But since Wal-Mart, which is a main retailer of both electronics and apparel, came in weak, their numbers have floated a black cloud over industry expectations.

According to the National Federation of Retailers, even though more money was spent, less people spent it.

This leads to an interesting predicament…

If less foot traffic entered stores, but more money was spent, we can easily deduce that the middle to higher income families were spending…

Therefore, it's the lower to middle income families that are being more frugal with their money this year.

That indicates an off balance. If most higher income families finished much of their shopping this weekend, then retail sales will slip into January, due to the fact that less people will be spending less money, since they have less money.

Because face it, most of those shoppers haven't saved much money for the holiday, so they'll be using credit.

In my opinion, Black Friday was the heyday… and all retail sales will fall from here.

Additionally, about that Cyber Monday concept that Bryan was talking about this morning, where retail sales on the Internet are said to be higher than normal today…

According to a MarketWatch article, today does not show the heaviest online sales of the holiday season. Internet traffic trackers comScore Networks and eBay Inc.'s PayPal service cite neither Cyber Monday nor Black Friday as any of the five heaviest online retail days.

Most of the heaviest days occurs in the two weeks leading up to Christmas, where shoppers become anxious, stop comparing prices, and just simply buy to ensure on-time shipments of their packages.

Overall, online retailers are expected to increase sales by 20% this holiday season compared to last year regardless of what days the purchases are made. Online sales are expected to breeze past the $100 billion mark for the first time… and account for 6% of total holiday merchandise sales.

Regardless, the investing public have spoken today, and decided that selling retail and major Dow stocks was the best step to take.

And that can't bode well for the industry as a whole.