Perhaps Tuesday's bounce technically set up the market for a selloff, but there is little question that President Obama's re-election is being used Wednesday as an excuse to dump stocks. After the knee-jerk bounces on Tuesday, we didn't have a very attractive technical picture to begin with, so once the selling kicked in, it picked up momentum quickly.
Breadth is very poor, at about 750 gainers to 4,400 decliners. All major sectors are down, while bonds are flying. The bigger problem is that the S&P 500 is now breaching key technical support at recent lows around 1400. If the index takes out that level, it will be pretty clear sailing to the 200-day simple moving average at 1380.
We're seeing a few things as active election plays. Gun stocks are up, coal is being hit and there is some interest in solar-energy names. I took a small position in First Solar (FSLR), which is a "green energy" play, but I'm almost totally in cash at this juncture and have no interest in putting money to work until the price action improves.
Unlike many other market commentators, my style is to bet on strength rather than weakness, and right now there is no strength. Be careful -- this market is in free fall, and history says post-election moves tend to gain momentum.