It was a terrible day for the market.
It opened weak, had a minor bounce, and then saw steady selling all day. It closed with a flurry of panic selling. Other than gold and silver, there was no place to hide as big-cap favorites, which have held up well lately, finally succumbed. The point loss was substantial, volume was heavy and breadth was weak. There's even a big, ugly head-and-shoulders top pattern in the major indices.
What has made this recent action particularly miserable for so many is that we haven't had any sort of relief bounce other than a few minutes on Monday morning. Many market players expected at least some temporary relief once the U.S. debt debate ended, but there has been no celebration.
Instead of bouncing on the removal of the debt uncertainty, the focus immediately shifted to the crumbling economy and sovereign debt issues in Europe. Earnings season has not been a positive driver, and it seems like every economic report lately has been a disappointment.
One thing the bulls will be focusing on as the Federal Open Market Committee's interest rate decision approaches is the possibility of some sort of QE3 program. With GDP forecasts ratcheting down and no sign of improvement in jobs or housing, the Fed is going to be forced to do something, even if many question its effectiveness.
We have fallen so far so fast, and sentiment has become so gloomy, that conditions are ripe for a bounce. We had almost the exact opposite of this action at the end of June and early July, but the market confounded everyone then and ignored overbought conditions far longer than what seemed reasonable.
