Muddy Waters

Rather than clarify things, yesterday's market served to muddy the already murky waters.

As the Yen-carry trade, which has been creating so much liquidity in the market hiccupped at the open, prices sold off on heavy distribution-like volume. This was in fact the type of behavior we have been looking for and had actually predicted would happen in yesterday's report where we called for a turnaround Tuesday.

But then in came the angels to the rescue and the first dip buyers were bolstered by more buying, especially in the Nasdaq 100, and distribution gave way to accumulation. There is no denying that liquidity remains in this market and that someone or some group with a lot of firepower is willing to step in and buy the dips in a significant way.

Technically the day was a distribution day, especially in the S&P and the Dow. All three major indices exhibit hangman patterns, which theoretically represent reversal signals.

However, all hangmen are not the same. Had the market dipped on high volume, but recovered late in the day on weak volume, we would be looking for an extension of declines this week. Instead, heavy selling in the morning was answered with heavy buying in the afternoon.

This overbought market can go either way here. Any prediction bolder than that is not grounded in reality.