It looked like the selling had slowed when the market opened on Wednesday morning. Small caps were bouncing, with many coming off lows, and the mood had improved among traders that were licking their wounds, but the action slowed in the afternoon, and selling accelerated into the close.
When the S&P 500 undercut Tuesday's lows around 4417, that triggered sell stops, and we ended up at the lows of the day.
Breadth went from slightly positive to two-to-one negative at the close, and the number of new 12-month lows expanded to over 200. It is classic corrective action and is what we need to get the indexes to align with what has already happened to the broad market.
This sort of action may not feel good, but it is the fastest way to create conditions for better market action as we move into the month of September. The ridiculous disparity between the indexes and the rest of the market has to correct to some extent before we see more interest in stock picking based on fundamentals and charts.
Many market players were likely discouraged by this action, and that is a good thing. Market bottoms are a product of disgust and dismay, and we have a long way to go before the indexes produce that sort of response. Many stocks are well past that point, but the indexes control sentiment, and that is the issue.
The bad news is that it was another losing day for the market. The good news is that we are making progress toward a healthy correction that will provide a foundation for better action in the fourth quarter of the year.
Have a good evening. I'll see you tomorrow.