That's when the selling pressure started and didn't relent. Some fund managers will wait until the end of the day to place their sell orders and it appears as if a whole host of stops were taken out along the way which only magnified the selling pressure. As aggravating as it was, it was healthy because you want the market to back-and-fill before embarking on a major move higher. Not that it necessarily has to.
Looking at sentiment, volatility and technicals; it looks like the market is in the process of forming an intermediate term, and potential longer term bottom.
We've had:
- Back-to-back days of large declines that hadn't been seen in a generation
- Horrible market breadth (advancing issues vs. declining issues) and (down volume vs. up volume)
- The Intra-day cumulative TICK on the NYSE set a record low (The NYSE TICK shows the number of issues traded on the NYSE which last traded on an uptick minus those which last traded on a down-tick). For example, if IBM traded at 90.45 then traded at 90.40, then it would be on an down-tick.
- High VIX readings
- Spike in the CBOE Put/Call Ratio
- High Liquidity Premium
- Massive price volatility and a major reversal day
In addition, there has been a divergence forming between new lows in the indexes and the number of stocks hitting new lows. As the market has moved lower, the number of new 52 week lows has been declining which is a positive. On Wednesday, volume was not that heavy and many stocks made large percentage declines on light or average trading volume.
Have a nice weekend!
Arthur Daret