If there were lingering questions about underlying market health headed into Tuesday, those questions were answered by the close, as major averages sold off late and finished near session lows. It's still a dangerous market.
The Fed policy statement was released at 2:15 p.m. EST. It was a case of no news being bad news for the market. The Nasdaq led the way, falling 1.3% on higher volume. I was hoping something in the statement would fuel some selling in the U.S. dollar, but I knew that chances were slim. The Fed is in a holding pattern for now -- not willing to expand its balance sheet yet -- and that's understandable in light of recent economic data that have been more good than bad.
Lack of buying interest in the indices remains a major stumbling block for the market. Late last week, indices rallied nicely on Friday, but volume came in lower than on Thursday. Once again, after a higher-volume decline for the Nasdaq on Thursday, buyers had no conviction on Friday.
Another disconcerting aspect about Tuesday's downdraft was that volume on the Nasdaq and New York Stock Exchange came in higher than on Monday. It was the Nasdaq's second-highest-volume decline since Dec. 8.
Also of note Tuesday was a technical breakout for the Powershares DB U.S. Dollar Index Bullish ETF (UUP). Until the dollar starts to weaken and the euro starts to strengthen, stocks will have a hard time making headway. Headline flow out of Europe will have to improve immensely to fuel sustained buying in the euro. It just doesn't seem like a likely scenario for now.
We're 12 days into a rally attempt that started on Nov. 28, and it's looking less and less likely that major averages will deliver a buy signal anytime soon. Even it does, lack of leadership remains a concern.
The lack of leadership is most apparent in the Nasdaq-100. Its chart is very weak at the moment. It shows four higher-volume declines in the past five trading sessions, and this points toward institutional selling. In the past seven trading sessions, it has made a series of lower highs -- another sign that buying demand is drying up in the index.
Index components such as Amazon (AMZN), Wynn Resorts (WYNN), Priceline (PCLN) and Baidu (BIDU) are done for now. Bull market leaders eventually roll over at some point. It's highly unlikely they will resume their leadership roles anytime soon. Apple (AAPL) doesn't look nearly as bad as the aforementioned stocks, but its chart is questionable as well. Selling wasn't intense in Apple on Tuesday, but it closed below its 50-day moving average on higher volume. It had been struggling to hold the line for several days, because of lack of buying interest.
One of the few high-quality growth names acting reasonably well is Google (GOOG). Most of its recent gains have come in average or below average volume, but it continues to hold above a prior buying area of $599.60 and an alternate buying area of $618.30.
Clearly, the market's technical picture took a turn for the worse on Tuesday. But recent market volatility means that a big percentage gain for the major averages on higher volume isn't completely out of the question. However, even if we see one in the coming days, it won't be enough to turn me immediately bullish. I might nibble at a stock or two, but I'd rather be patient and wait for scads of buying opportunities rather than a select few. The bottom line is that new leadership needs more time to take shape.