Quite a few players were worried that this market was going to correct some more, but most thought the catalyst would be higher crude oil prices. We did correct, but oil was down nearly 2% today. So market players found a few other reasons to intensify their selling. China announced some surprise weakness, Spanish debt was downgraded and there were reports of some unrest in Saudi Arabia.
The economic news from China was probably responsible for some of the weakness, but this was a market that has been signaling caution for a couple weeks now. We have had a series of technical distribution days, especially in the Nasdaq, as well as a number of failed bounces. We had been holding within a trading range but were unable to hold recent lows today.
All the major indices, except for the Dow, are now under their 50-day simple moving average. For many technicians, that is an automatic sign of caution. This is the first time the market has been below that level since the beginning of September. The last time the S&P 500 broke its 50-day support was April 2010. It corrected almost 14% after that before finally bottoming in July.