Ouch!

OK, I blew it. Yesterday it seemed to me the Fed and reaction to it was negative but, on balance benign. Then I went to bed and Asia got the global equity markets off to a >2% down day. Not much positive to say – volume up, breadth horrible, just a hard sell off. SPX crashed through the 200 day and closed just above the 50. VIX spiked more than 13%.

Bonds again bid up, this time with the long bond joining the stampede and going to a 3 handle yield, as news came out that the Fed would be including it in its rollover purchases. Big pop for the slumping Dollar, reversal for the euro.

So now we’re in full on defensive mode. I’m thankful for my hedge position against my longs, but overall took a little bit of a beating today. Technically, we have some damage, but the SPX held the 50 day held and most of the charts aren’t broken down yet.

There is reason to be cautious however: the pattern is that we creep slowly up on light volume and get whacked in a fast, high volume correction, losing in hours what took weeks to gain. If we break down through the 50 day on the SPX, which I’m betting will happen, it could get ugly. As I write this on Wednesday evening, Asian markets are again under selling pressure. Be careful out there.

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