“You can check out any time you like, but you can never leave.”

That seems the way bots have programmed markets to suit their needs, but that doesn’t make market action any less bizarre or Orwellian. Just sayin’…

It may be a blessing for bulls to see a sell-off in stocks to put a dent in the severe overbought conditions we’ve been posting for the past few trading days. On the one hand bulls can get values back to more reasonable levels given other considerations (weak economic and earnings data) while bears can start to make their case again the rally is based on a rise in crude oil prices only and little else. Even today, the IMF has warned the global economy is “..clearly at a delicate juncture, where risk of economic derailment has grown.” As to the latter, it’s been whispered that banks are buying crude oil and energy stocks to protect themselves from massive collateral failures in debt they’re exposed to. I don’t know if that’s true but it makes some sense. And, it’s not just U.S. banks with this exposure, so too are international banks, funds and many others.

Stocks fell sharply at the open then rallied once Europe closed again and trading bots rushed in to defend their long positions. By the end of the trading day stocks, commodities (oil in particular) fell after making back some the large portion of early losses.

Below is the heat map from Finviz reflecting those ETF market sectors moving higher (green) and falling (red). Dependent on the day (green) may mean leveraged inverse or leveraged short (red).

Volume increased on Turnaround Tuesday as selling seized the tape. Breath per the WSJ was negative.

Chart Of The Day

Moving from extremely overbought to just plain overbought is still overbought. Hmm, is that too many overboughts? Anyway, it was just a matter of time before markets came down near earth.

Who knows what tomorrow will bring? One thing in the future that stands out is next week’s Fed Meeting. It sees bulls may be confident there will be no more interest rate hikes in the near term.