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Here is what that looked like intra-day.

There has been unusual volatility for a while, but this was noteworthy. 

A Weekly View of the S&P 500 Index Shows the Bigger Picture. 

The recent rally stalled at a well-known Fibonacci retracement level.  In addition, it doesn't bode well for the bulls (at least in the short-term) that price just broke down through critical support, and on high volume.

When markets are ready to change course, we often see violent moves. The side that was enjoying the trend is fighting to keep it alive. The new side, taking over, will have nothing to do with that. Back-and-forth it goes … then all it takes is a massive move to spark a little fear and greed … and you saw what can happen.

What Does the VIX Show?

Here is a chart of the Volatility Index ("VIX") from Bespoke.

Apparently, the VIX is not the only way to measure fear in the markets.  Another way is to follow what "insiders" do.  The idea is that if they believe the market will get stronger, then they hold their stock.

So, What Does Insider Activity Tell Us?

According to Trader's Narrative, insider selling continues to dominate buying by a wide margin. We’ve seen a continuously extreme reading from insider activity measures for the past 12 months. The market has – until recently – ignored this vote of "no-confidence" and plowed ahead. This sustained level of selling pressure by insiders is unprecedented in recent history. Usually we see the buy/sell ratio fluctuate between the two extremes.

NYSE CEO Explains the Sell-Off.

NYSE Euronext CEO, Duncan L. Niederauer, says his exchange slowed trades of stocks including 3M, Accenture and P&G during the 998 point drop.  So, you'll be happy to hear that it was a "feature" … not an "error".

We are now pretty over-sold and due for a bounce. Throughout the recent rally, pull-backs triggered buying.  It would surprise me if that happened again here.

Here is what that looked like intra-day.

There has been unusual volatility for a while, but this was noteworthy. 

A Weekly View of the S&P 500 Index Shows the Bigger Picture. 

The recent rally stalled at a well-known Fibonacci retracement level.  In addition, it doesn't bode well for the bulls (at least in the short-term) that price just broke down through critical support, and on high volume.

When markets are ready to change course, we often see violent moves. The side that was enjoying the trend is fighting to keep it alive. The new side, taking over, will have nothing to do with that. Back-and-forth it goes … then all it takes is a massive move to spark a little fear and greed … and you saw what can happen.

What Does the VIX Show?

Here is a chart of the Volatility Index ("VIX") from Bespoke.

Apparently, the VIX is not the only way to measure fear in the markets.  Another way is to follow what "insiders" do.  The idea is that if they believe the market will get stronger, then they hold their stock.

So, What Does Insider Activity Tell Us?

According to Trader's Narrative, insider selling continues to dominate buying by a wide margin. We’ve seen a continuously extreme reading from insider activity measures for the past 12 months. The market has – until recently – ignored this vote of "no-confidence" and plowed ahead. This sustained level of selling pressure by insiders is unprecedented in recent history. Usually we see the buy/sell ratio fluctuate between the two extremes.

NYSE CEO Explains the Sell-Off.

NYSE Euronext CEO, Duncan L. Niederauer, says his exchange slowed trades of stocks including 3M, Accenture and P&G during the 998 point drop.  So, you'll be happy to hear that it was a "feature" … not an "error".

We are now pretty over-sold and due for a bounce. Throughout the recent rally, pull-backs triggered buying.  It would surprise me if that happened again here.

The rally finally ran into some resistance.  Still, the Dow Jones Industrial Average remains above 11,000.  However, the thing that caught my eye last week was that the Dow
broke below its recent trend-line.  By itself, not a cause for major concern, just a key to notice.  The question is whether it can get back above that level, or will this be the start of a more meaningful correction?

It is also worth noting that the MACD indicator is showing more downside momentum than it did at the same price level earlier in April.

A Peek Over the Wall.

Is
China's Shanghai Index sending a warning about the world economy or just
their economy?

Unless things change in a hurry, China's Shanghai
Composite could drop significantly.  This chart shows the triangle
pattern that played-out over the past nine months.

You can think of the Triangle as a well-contested battle
between the bulls and the bears.  Inside the pattern, neither side
gives-up much ground.  However, when one side loses conviction, the
market  surges in the direction the winners push it. 

Triangles
are often continuation patterns.  So, be wary that this move is a
head-fake down to trigger a big rally.  Otherwise, the target is pretty
far below.

Sentiment Here in the United States is Still Very Bullish.

While stocks have certainly become more volatile in the last two weeks, newsletter writers seem to be taking it in stride.  According to Bespoke, the latest Investors Intelligence survey of newsletter writers  found that 54% of those surveyed are now bullish on the market.  The last time bullish sentiment was this high was back in December 2007, before the crash.

Another important to measure of the crowd’s extreme bullish sentiment is that fewer than 20% of advisors are currently bearish. According to Prieur du Plessis, these are first indications of a market top.

Another Sign of a Potential Top?

The U.S. Treasury Department plans to sell “up to” 1.5 billion
shares of Citigroup in the government’s
biggest step yet to exit the 27 percent ownership of the bank it rescued
during the financial crisis. Bloomberg quotes Geithner as saying: "We’re
putting TARP
out of its misery," and "the government is withdrawing from the
financial industry after forcing lenders to recapitalize with private
money."

If you think that is funny, then so is this cartoon.

The rally finally ran into some resistance.  Still, the Dow Jones Industrial Average remains above 11,000.  However, the thing that caught my eye last week was that the Dow
broke below its recent trend-line.  By itself, not a cause for major concern, just a key to notice.  The question is whether it can get back above that level, or will this be the start of a more meaningful correction?

It is also worth noting that the MACD indicator is showing more downside momentum than it did at the same price level earlier in April.

A Peek Over the Wall.

Is
China's Shanghai Index sending a warning about the world economy or just
their economy?

Unless things change in a hurry, China's Shanghai
Composite could drop significantly.  This chart shows the triangle
pattern that played-out over the past nine months.

You can think of the Triangle as a well-contested battle
between the bulls and the bears.  Inside the pattern, neither side
gives-up much ground.  However, when one side loses conviction, the
market  surges in the direction the winners push it. 

Triangles
are often continuation patterns.  So, be wary that this move is a
head-fake down to trigger a big rally.  Otherwise, the target is pretty
far below.

Sentiment Here in the United States is Still Very Bullish.

While stocks have certainly become more volatile in the last two weeks, newsletter writers seem to be taking it in stride.  According to Bespoke, the latest Investors Intelligence survey of newsletter writers  found that 54% of those surveyed are now bullish on the market.  The last time bullish sentiment was this high was back in December 2007, before the crash.

Another important to measure of the crowd’s extreme bullish sentiment is that fewer than 20% of advisors are currently bearish. According to Prieur du Plessis, these are first indications of a market top.

Another Sign of a Potential Top?

The U.S. Treasury Department plans to sell “up to” 1.5 billion
shares of Citigroup in the government’s
biggest step yet to exit the 27 percent ownership of the bank it rescued
during the financial crisis. Bloomberg quotes Geithner as saying: "We’re
putting TARP
out of its misery," and "the government is withdrawing from the
financial industry after forcing lenders to recapitalize with private
money."

If you think that is funny, then so is this cartoon.