The Bulls are wounded and so reflect the slowing ability of Oil stocks or Apple (almost alone) to hold up the Indexes, and mask distribution that has been ongoing for some time. The pattern today was really perfect from a bearish perspective; as has been the protracted recent action as set-up the sequence of failed drops and unsustainable rebounds.
It's the orthodox technical pattern we suggested, including a rebound in the wake of the sell-off, followed by new weakness. Yes there's a tiny zone or cushion still existing between the lows of Tuesday (preceding Wednesday's call for a bit of indecision with light volume trading during the Jewish Holiday), and the crucial September lows, which we suspect will be approached, and then breached.
This will then put the S&P on-track to challenge the June lows, with the 'gunfight at the OK Corral' seemingly behind, and the battle generally a question of 'how deeply' we penetrate the vacuum between June lows and September highs, before meaningful rebound attempts (if any; as a 'flash crash' would sure negate that prospect pending deeper probes).
In a sense we may have to 'discount' whatever occurs early Thursday; of course some action may attempt to emulate the old adage of 'sell on Rosh Hashanah, and buy on Yom Kippur'. I think that's hardly relevant here, where Oil prices, Dollar strength, and multiple major stocks with a risky 'wedge' pattern of distribution, risk surrendering more ground.
In sum: today's normally quiet semi-holiday session was anything but. It followed the outlined pattern throughout, and has risks greater than recognized by a crowd of pundits who are trying to condition investors not to worry about 'normal corrections'.
Sure, if that's all there was to be concerned about I would concur. They pretend the market has been going up and needs a rest; it's been very clearly deteriorating for months; and more notably in recent weeks as a combination of Oil and tech stocks held-up a sluggish list. Last night I noted a number of FANG and other stocks with 'wedge-like' distribution patterns; which are slowly gravitating toward breakdown.
Conclusion:
the stock market should break down. There is now both a technical and geopolitical aspect to all of this; which could roil. As stock markets tank; some pundits will say it's the military risks. Only slightly. I know some will say it doesn't matter or just hold some cash (they might be listening to my investor approach; although optimum sell points are behind already). One doesn't know 'how much' it matters until after the 'deluge' of selling is past. We do know the market is due for a deluge.
We hold short Dec. S&P from 2167.
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