Small-cap stocks extended the opening slide after Treasury Secretary Henry Paulson suggested that the government’s initial plan to rescue our fragile financial system by scooping up bad debt off the books of financial firms wasn’t that great of an idea after all. A lack of confidence in the rescue plan simply added to existing jitters about the economy and the corporate profit outlook. At 12:16 p.m. ET, the Russell 2000 (NYSE:IWM) was down 18.46, or 3.83%, at 463.83.

Paulson said that the government was moving toward another round of capital injections into financial institutions, scrapping the original “rescue” of buying up toxic debt as a way to utilize the $700 billion in funds targeted to rescue the market from the credit crisis. Fair or not, the immediate reaction from stock market investors to the news was that they seemed to see the announcement as another sign of a wishy-washy, “putting out fires” approach to the crisis instead of a well-thought, well-executed approach to the problems at hand.

Treasury markets rallied as equity markets tumbled, reflecting flight toward “safe haven” outlets and away from stocks. The yield on benchmark 10-year notes fell 2%. Yields move inverse to price, so the slide on yields reflected demand for the 10-year note product. The U.S. dollar was down mildly against the euro, but absolutely tanking against the Japanese yen, losing some 2.1%.

Individual small caps on the slide today included Wimm-Bill-Dann Foods OJSC (NYSE:WBD), as Russia’s largest dairy company tumbled 24% on news that ratings agency Moody’s downgraded the firm’s debt. Pretty much anything linked to Russia right now is trouble as the Russian Micex Stock Exchange closed for two days Tuesday to try and stem massive selling in Russian equities. Within the eastern European theme, Central European Distribution Corp. (Nasdaq:CEDC), the largest vodka producer in Poland, tumbled 21%. Hadera Paper Ltd. (AMEX:AIP), an Israeli company that specializes in manufacturing and recycling of paper products, was off 20% after reporting earnings.

Even though crude oil prices were down today, select airlines were struggling. UAL Corp. (Nasdaq:UAUA), United Airline’s parent, was down 23%, while small-cap carriers US Airways Group Inc. (NYSE:LCC) was off 20% and Alaska Air Group Inc. (NYSE:ALK) was down 7.5%.

This is a fascinating juncture for the chart structure. Although the picture is decidedly one-sided to the bearish viewpoint, we are sitting at the spot where the previous Oct. 10 lows were forged and at a near-perfect symmetrical timing place to try and carve out an inverted head-and-shoulders bottom. The odds favor further downside probing and a retest of the more recent bear market bottom set Oct. 28, but this is an intriguing spot to closely watch price action and chart patterns. As for today’s trade, the breach of support at 480, then at 474 was troubling. There is very little convincing short-term support below 468 until we get close to 462; any breach of the latter greatly enhances the chances for a retest of 442. On the upside, if the market starts to rally this afternoon, then resistance will be first at 480, then at 495.