Many were belittling the European crisis and the signs of a slowdown because earnings were fine. As I previously mentioned earnings are a backwards looking indicator. The fact that earning reports were fine in July does not speak to the current state of the economy or the future state of earnings.
When final demand slows it takes a while for the companies further down the supply chain to notice that. Retail sales, auto sales and mortgage applications have slowed markedly in recent months but many were happy to ignore that because earnings were fine. With Cisco's earnings report the myth that earnings can buck the economy will be laid to rest.
This does not mean that the bulls are now dead meat. Cisco trades at 11 times this years earnings ex net cash. Intel trades at eight times ex net cash so a case can be made that a lot is already priced in. Additionally, not many jumped aboard this rally so there might not be that many people to sell. A reasonable case can be made for a trading range.
The ball is now in the bears court. The oversold condition has been relieved and the bears can now show what they are made of. They can use this overbought reading to take the market sharply lower or we could see them waste it chopping around.