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Don't blame everything on China

We gapped down 2 percent at the open and stayed down.

You can blame it on China's poor manufacturing numbers if you want, but the number was in line with consensus. This was a broader selloff than that. The whole market was down roughly 3 percent. OK, industrials like GE and United Technologies down 2 to 3 percent, I can understand. Commodity names like Exxon or DuPont down 2 or 3 percent make sense. They all have international exposure.

But telecom and utilities? They were all down 2 or 3 percent as well.


Traders on the floor of the New York Stock Exchange.
Getty Images
Traders on the floor of the New York Stock Exchange.

AT&T. Verizon. Con Ed. Duke. All down. They don't sell to China.

And how about regional banks? They're all down 3 percent or more as well. SunTrust doesn't have business in China. KeyCorp doesn't either. Neither does Regions Financial, nor PNC.

My point is, we have what traders call "degrossing," where participants are simply taking down overall exposure a bit.

Besides China, there's two other issues:

Read MoreChinese firms increase support for stock market

1) After a six-year bull market rally, the buyers lack conviction. And the shorts, after a long dry spell, finally smell that they might be able to press an advantage. That is a toxic combination and allows for days like Tuesday, when the market is down on a China PMI in line with consensus.

2) A major reason buyers lack conviction is the Fed. Some argue the Fed should remove uncertainty and raise rates once in September and say they are done for the year. Others argue the opposite: that NOT raising would remove uncertainty.

So what happens from here? It is very normal to have a retest of the lows after the big rally we had at the end of the week. Very normal. The low for the Dow last week was 15,370. We closed Tuesday at 16,058, so we are still about 700 points away.

That's a long way away.

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  • Bob Pisani

    A CNBC reporter since 1990, Bob Pisani covers Wall Street from the floor of the New York Stock Exchange.

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