What an interesting day!

First things first. The morning brought new home sales, which had the headline reaction of spiking the market upward. But then, something new happened - people read beyond the headline and actually read the data! That was a first, and embedded in the data was the truth - a nearly 10% decline in sales price!

Now guys, that's huge. In fact, its beyond huge - its cataclysmic. Ten percent? I thought we weren't going to see severe price declines in homes? That's what all "the wise men" said, isn't it?

Guess what - its actually worse than as reported, because incentives like "free landscaping" and such don't show up in the numbers!

Anyway, the market responded as you'd think it might - it sold off.

The 10 year was pretty much flat at 48.57 (4.857%), not a material change from yesterday, but still over the 4.8% "trigger" level. It pinned 4.9% this morning, which was instantly bought heavily - but again, the danger light remains on.

On a technical basis we have the SPX posting a SELL on both MACD (rolling over) and Stochastics (fast more than 10pts below slow). On my third "internal" technical indicator it doesn't quite get there. Another day like today, however, will get there.

The Industrials are forming a very disturbing chart pattern. Specifically, each day we get a higher high but it fails to hold, returning to a lower level than the day prior. This is a rare trend - it is an indicator of failing momentum and is frequently very tradeable to the downside.

The Composite broke the wedge to the downside and closed at support. Remember, we've been here before - about a week ago. Is this "the real deal"? Maybe. But we have to convincingly blow through that support level to do it. I want to see a close below 2500 to be convinced - I don't like headfakes and they've cost me too much money the last few months thinking we're going to get it "tomorrow", loading up on some ultra-short ETFs, only to get stopped out at a couple of grand loss the next day or two. No more of that for me - until I see a convincing break I'm not playing!

In response to the "Anonymous" comment that "The Canary" has been crying wolf, give it a rest kid. Not true. I've said that the indicator is what it is - if and when it gives me a solid signal, I'll post it here. The components all deteriorated bigtime today, but we are still not there. One more day like today will do it though - and going into the long weekend, Friday is likely to be very interesting, as much about sentiment will be learned by whether traders are willing to go into the long weekend with positions open and what sort of squaring they do headed into three days with your fingers OFF the keyboard.

I took two positions today - a straddle on SPY, and a straddle on CYPB. I had a long CALL position open on Cypress and closed it at more than a double around noon today, replacing it with a straddle (on "house money", keeping the rest.) These little biotechs have a history of snap-reversals and require a lot of nimble maneuvering to play successfully - and since I'm mostly out of touch for the next week I decided that I'd put something on that won't hurt me if I can't pay attention to it - its a near certainty to ramp one way or the other in the coming week or thereabouts. Both positions are profitable for the day - if we get a plunge tomorrow it will be very tempting to take the SPY money off the table before the end of the trading day......

This could be another headfake. We had one a month or so back and it didn't happen. This looks more convincing, but still, this might be the balloons being filled rather than the doors being swung wide for the party. Nonetheless, the signs are becoming stronger and the warning beep a bit louder.

Tomorrow, if we get strong follow-through on today's declines, it is a near certainty that the indicators will trip. That would be an ideal situation - to be able to make a call before the end of the day, so I can put on the positions I want for the next week.

With my sort of luck though we won't get that - what we'll get instead is a "close but no cigar" situation, leaving me having to guess. I'm hoping not, but consigned to the fact that my luck usually runs this way..... and if true I'll be "out" for the week, in cash, for whatever follow-through (whether a snap reversal or the start of something) next week.

Oh, on administrative issues, comments will be disabled next week. I may be able to make brief entries depending on my time next week, but moderating comments will be impossible. As such I will be disabling comments tomorrow evening, and turning them back on a week from Saturday.

Good luck tomorrow!