Fear. Pure naked fear. You can smell it.
The fear emanates from those who have been buying stocks for the last couple of years who have never seen a selloff of this magnitude -- it's been six years since a tech selloff of this magnitude, so that makes sense when you think about it.
The fear that emanates from fund managers who were up huge and gave back such huge gains yesterday that they almost have to sell at the opening to lock in their years.
The fear that emanates from the fundamentalists who forgot what it was like to have pre-announcements and are now faced with a rash of them and therefore expect more.
The fear of those Wall Street moneymen of the president, who has brought his angry but folksy rhetoric to their world -- not to the world of rabid fans around the country that are as far from New York as Mars. They see the "crazy" off-handed comments by a president that is quite different in tone and thought from Jerome Powell, and they wonder how Powell can get out of this box. You can't bend to the president without destroying the Fed's independence. So how does he walk back his comments that triggered the selloff.
All of these camps are coalescing to bring out selling pressure that is far more than the ETFs, the corporate buybacks and the index fund buyers can handle. A concentrated burst of selling is the equivalent of a mini-crash to these buyers. They don't have time to even put their bids in. The broken way the market acted yesterday did feel like a flash crash, didn't it?
Now we did have a selloff of incredibly swift and deep magnitude just nine months ago when the trade wars began. That was, in retrospect, a correct call to be worried about trade wars but an incorrect call in terms of what the market did. It ended up being driven by powerful VIX programs, fueled by thinly capitalized entities.
This time we haven't figured out what instrument went haywire. We don't know if it is a bunch of growth funds that decided there was no price that wasn't too good to sell.
Now, though, step back and ask if your whole screen should be red. This is day two of the selloff after a 10-to-1 down-to-up ratio of a day.
The answer is, of course not. Today is the day that the index fund sellers and the European spillover sellers and the lock-her-up sellers meet buybacks, hedge funds that need to make money and companies in the non-economic world that are a sure thing.
Today's the day when health care companies that have strong growth get bought. It's the day when the drug companies with decent yields slow down their decline and then reverse. Any food company with decent numbers stays the course.
It's also the day when the industrials related to non-auto and non-housing tend to rally after the margin selling is over. Check back between 2 p.m. and 3 p.m. ET.
But then there is tech -- and we don't know tech. This tech selloff started with Facebook (FB) and then jumped to Micron Technology (MU) , and it has led to a scary concept: the slowing of the data center. How could it not be, you figure, if the stocks of Advanced Micro Devices (AMD) , Micron and Nvidia (NVDA) have been hit so hard.
But then again, that's the point. Some sectors bottom faster than others.
However, as I have said over and over, you need the obituaries for FANG to be front page -- they are almost universally there. That's when you can buy.
Last thought, Amazon (AMZN) : because this is the key to the market. If you want to watch one stock for tech to bounce it will be this one. But the selloff has to have an intraday retest from a bounce, and if it holds, then a second one. If we are past margin clerk hour -- meaning between 1 p.m. and 2 p.m. -- and you get a bounce, it could still be a sucker's game. If you see it developing, you can pick, but wait to see if the selling machines are still going haywire at 2:45 p.m.
If they are, well, go back to the first group, it will really start to shine.