When the market was in an uptrend I would often comment how the dip-buying was so automatic it was a reflexive. It didn't matter what the news was or even if stocks were overbought. As soon as there was some red on the screen, the buying would start.
Recently we have seen the inverse of this type of action. Strength is automatically being sold.
This has happened every day for the past week. There will be a gap-up or a bounce and that triggers robust selling. The lows of the day are taken out and hope for a market turn are crushed. When we see green on the screen these days you can't help but reach for the sell button.
At some point this reflexive action will end and the folks that have found it so reliable and easy will be caught leaning the wrong way. That will produce a very sharp snap-back. However, trying to time this sort of action is an extremely tough task.
Wednesday there is no question that the market will see a substantial reaction to the Federal Open Market Committee decision at 2 p.m. ET. While it is still widely anticipated that Fed Chair Powell and his posse will raise rates a quarter point there is some hope for a surprise and much hope that there will be some very dovish comments. I will discuss this more Wednesday morning but this market would really like to rally on the Fed news and it is going to be very tricky.
One interesting statistic on my screen Tuesday afternoon is that only about 16% of all stocks in the market are now trading above their 200-day simple moving average. That means they have been trending down for months and just about everything has broken down.
In January 2016 that number hit 9% on an intraday basis but the lowest closing level was around 13%. Back in 2008 it went under 2% at the lows and stayed under 10% for a month, which is what really caused some pain.
A late bounce took the indices off the lows again, but this market continues to disappoint the folks that are looking for some relief. We'll find out Wednesday if the Fed is going to have a gift for the hopeful bulls.
Have a good evening. I'll see you tomorrow.