The question today was whether or not we would be able to shrug off the very weak housing news. It didn't come as a complete surprise, so there was a chance the news had already been priced in to the market, but we just weren't able to lose the negativity. We bounced a little after the news and stumbled around, but we closed weak and the bulls showed little conviction.
While I think "the market" is acting stupid beyond belief, apparently it has not fully embraced and priced in the chances of a double dip, and that is why bad news is being treated as bad news. Once the market really accepts the idea that the economy MIGHT be in trouble and expectations are lower, then we'll have a better chance of rallying on bad news.
Volume picked up today, so we had a technical distribution day to help keep the downtrend under pressure. The bright spot was a bounce in oil, but otherwise all major sectors were in the red. Breadth ended the day about three-to-one negative, which was an improvement over the early levels, but still a cause for concern.
Bonds powered higher once again. TLT is hitting the levels it saw back in early 2009, when the financial crisis was turning into some panic. This will end badly for those long TLT; the one to buy right now is TBT. Obviously, market players are happy to take no yield at all to be in the safety of bonds, which is not a market positive.