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There's no two ways about it -- investors feel blindsided. But they shouldn't since the news taking the averages down have been building for some time. Stocks rode higher on a sea of Fed liquidity, bailouts, transfer payments and ultra-low interest rates. They became incredibly overbought and now they're not. Confidence in the integrity of markets is at a low point shocking even the most ardent and vocal bullish cheerleaders.

What lies ahead? Nobody knows. Certainly economic and earnings news have been helpful but then there's that "sell the news" deal combined with newly revealed debt concerns at home and abroad.

I'll leave it to others to expand on today's news since the tape is really all that matters and it stunk. It does seem like there's another shoe to drop and what that might be is beyond my ability to know.

Volume was heavy again as distribution continues with breadth data still sharply negative per the WSJ below:

 

The NYMO 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.   The market is now short-term oversold obviously.

The 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. The markets are now undergoing the long awaited correction but are doing so in a rapid manner.

 

 

The VIX has risen suddenly to levels indicating great fear.  We haven't seen these levels since 2009. The VIX 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 Major U.S. Markets

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