Investors were going along complacent as stocks were rising on light volume. Then before you could order that new Porsche "BAM!" things fell apart.
What was the big problem?
China raised interest rates a touch which caused commodities to sell-off sharply; earnings news from Apple and IBM were sold; and, the drip, drip, drip from bank mortgage issues continues. As to the latter, Pimco (the Treasury's best domestic customer) and the NY Fed want
BAC to repurchase bad mortgages
. This would be sort of a reverse bailout.
Be sure to tune in to our
with Telvent DTN Senior Analyst Darin Newsom as we discuss current commodity markets and the factors driving markets.
Anyway, volume increased on the sell-off while breadth was negative and perhaps enough so to register a 10/90 day for the NYSE.
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is a market breadth indicator that is based on the difference between the number of advancing and declining issues on the NYSE. When readings are +60/-60 markets are extended short-term.
McClellan Summation Index
is a long-term version of the McClellan Oscillator. It is a market breadth indicator, and interpretation is similar to that of the McClellan Oscillator, except that it is more suited to major trends. I believe readings of +1000/-1000 reveal markets as much extended.
is a widely used measure of market risk and is often referred to as the "investor fear gauge". Our own interpretation is highlighted in the chart above. The VIX measures the level of put option activity over a 30-day period. Greater buying of put options (protection) causes the index to rise.
Continue to Concluding Remarks
Was this an out-of-the-blue selloff? Yes and no. We've been pointing out overbought conditions, the low VIX level (complacency) and the Summation Index (getting overbought) which in the past has led to sell-offs.
Also a string of daily DeMark sequential 9 readings on many indexes led to us exiting all related leveraged issues on Monday.
Paging David Tepper!? Maybe we should ask CNBC to interview him again quickly to reinforce his "win-win" theme. Or, perhaps his previous appearance on CNBC was his opportunity to sell us stock. I'm just wondering.
Let's see what happens. You can follow our pithy comments on
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