Late Rally Falls Just Short

"Today is a test day a little bit," says Kowalchik. "At this point it's not about why, but when is it going to stop?"

The Federal Reserve has refrained from cutting the fed funds rate despite the demand for cash reserves by banks, and despite the problems companies are having borrowing short term money. The commercial paper programs for troubled companies like Countrywide Financial(CFC Quote) have hit a wall. Its short-term debt was yielding over 12% Thursday morning.

Countrywide fell 19% Thursday, after an 18% plunge Wednesday.

The Fed injected anther $17 billion of liquidity through open market operations to bring down the effective fed funds rate, which is the rate banks use to lend to each other overnight to maintain stable cash reserves. That rate usually matches the fed funds target rate of 5.25%. Banks are required to have a certain amount of reserves daily. When there's panic in the markets, banks hoard cash and drive up the rates they use to lend to each other bring that rate above the fed funds target rate.

But St. Louis Federal Reserve President William Poole said Wednesday night the Fed is not going to cut the target rate unless there is a financial "calamity." So far, it seems that a 10% correction and concerns about Countrywide going bankrupt don't fall into that category.