Well, it was a case of buy on the rumor, sell on the news. Stocks moved up from the open, coming nicely back into Monday's range and then moved yet higher immediately following the release of strong economic numbers at 9 AM CT. We then saw notable strengthening of the dollar, a dip in yields, some selling in commodities, and toppiness in stocks shortly after the release: the confluence of those told us that global macro traders were exiting the risk trade.
The resulting drop took us all the way to new lows and, indeed, to our first weekly downside target. (See here for profit targets for this week). Particularly notable, however, was the volume to the downside: volume during the 10:00 AM CT half hour ran about four times the average value for that time of day or about eight standard deviations above the norm!
That tells us that there was tremendous institutional participation to the downside. Those are the kinds of moves with legs. The fact that the downside move followed from a scenario of continuing technical weakness was also strongly supportive of the bear case. Stocks making fresh 20-day lows continue to expand and continue to outnumber new highs, suggesting that we have, indeed, made an intermediate-term shift away from the bull.
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