If one is looking for a silver lining in the action today, one will have to look very hard. We had a minor bounce attempt in the last hour, but the selling pressure was relentless, breadth was horrible at nearly 10-to-1 negative, and volume increased, giving us a technical distribution day. If you dig a little deeper, the action in financials was particularly poor, and leading small-caps were absolutely decimated. Good recent earnings reports made no difference today. The sellers hit them all.
The market has made a pretty good move off the lows we hit at the beginning of July, so a pullback and some profit-taking aren't a huge surprise. The more important question is whether this is the start of a failed bounce that takes us back toward the lows of the year.
Since the top in April, we have had five or six failed bounces, and in almost every case we were turned back right at an important technical level. This time, we are failing to make it through the June high of 1131. We were on the verge of attacking it for over a week but never managed to push through, and now we have this nasty rollover.
It has the feel of a change in character, which is reinforced by the fact that the primary cause of the selling is the Fed announcement yesterday. Market players are now worried that a bad economy really is a bad thing rather than a positive. The Fed isn't giving us more cheap money just to be nice.
We have seasonality and thin trading working against us. We will have to look to macroeconomic news for positive catalysts, and it sure doesn't look like much will be forthcoming in the near term.