This market is in serious trouble. For three years, traders have been accustomed to buying stocks on modest dips of 3 to 6 percent or so.
It's not working this time.
There have been modest attempts to buy in the past week, but the buying interest has been light and it has made no difference.
At some point (this has been happening the last few days) buyers realize they are getting no traction. No pickup when Europe closes at 11:30am ET. No closing-hour rally. Nothing.
Just drifting lower.
The response: a buyer's strike. Buyers step away until they see a buyable bottom.
But that leaves the market vulnerable to additional downdrafts; that causes a spike in the VIX, which causes a spike in trading volume.
That is what is happening today. VIX futures are spiking: June up 4.5 percent, August up 3.3 percent, September up 2.1 percent. That gets peoples' attention.
And volume is spiking. We will do north of 4.5 billion shares on the consolidated NYSE tape today, the highest in a month.
a) 10-year U.S. Treasurys and the German bund both end at historic low yields.
b) selling the U.S. consumer. The weakest sector today, by far, is consumer discretionary: retailers and home builders. Retailers were the market leaders going into May, but no more — selling has accelerated since earnings season began a weak ago. Home builders were the last leadership group standing, but in the last two days they have been selling them with a vengeance: Standard Pacific and KB Home and Pulte are all down about 10 percent, in two days.
c) Dow Transports down 3 percent, with the Dow Industrials down 1 percent. Ugh. That is an unusuall wide divergence.
d) precious metals (gold) split from other commodities, rallies on poor Philly Fed on hopes Fed will do QE3, but the rest of the market doesn't believe it.
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