What's wrong this time? While the weekend issue was the problem with the banking system in Europe, there is an even more immediate problem.

Most traders do not want to touch this market. That's why bids have evaporated and volume is relatively light, despite the large point declines.

Why are most traders on the sidelines? Because it is well-known that the only people in the market right now are people who have to sell (in some cases, liquidate) positions.

Knowing that, if you were a buyer with cash on the sidelines, would you jump in right now? Some might play on the edges, but most will be conservative.

As a result, the psychology has become skewed. The traditional metrics that many traders use to decide when to buy and sell stocks (technicals, value) are not working.

Consider:

1) on technicals, the spike up in new lows (nearly 1,000 at the NYSE, highest since 1998), as well as the CBOE Volatility Index over 50, both suggest market bottoms.

2) the big drop in commodities and commodity stocks are historically viewed as occurring at the end of market declines, not the beginning.

Traders intellectually understand these two points, but emotionally they don't believe it.

Regardless: there is something else that rate cuts might address: deflation.

What is happening today is DELEVERAGING and DEFLATION. The deleveraging part is painful but necessary: there is simply too much debt, too many stores, too much of a lot of things, and this is part of the process.

As for deflation, there might be something to do here: banks cutting rates. That traditionally causes reflation. That's the theory behind the desire for more rate cuts.

Beyond this, we are continuing to address the sources of the problem. For example, it is likely we will get a centralized clearinghouse for credit default swaps, which will create greater transparency.

And let's not forget what the President signed into law on Friday:

TARP: Feds will purchase up to $700 billion in illiquid assets

Fed: will pay interest on bank reserves held at the Federal Reserve Bank

FDIC: will increase bank deposit insurance to $250,000 from $100,000

SEC: has authority to suspend mark-to-market accounting

The federal government has not even used some of these powers yet.

Bottom line: more help is coming.

• Global Markets Pummeled By Rising Recession Fears
• SEC, Fed Aware of Everything at Lehman: Fuld

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New from CNBC.com:

- The Dow 30 at a Glance

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