SUMMARY:

- Day two of the pullback and all is fairly well.

- Consumer credit dives $7.5B in February. If there is no credit, there is not a lot of credit spending.

- Getting the tests and now we see if the buyers show up once more.

Stocks continue the fade on more light volume.

Definitely no news to drive any upside in the pre-market and nothing the rest of the session either. The IMF, bolstered by the new Administration's embrace of all things non-U.S. talked of $4T in toxic debt for world financial institutions still to swallow. Of course the IMF, despite its grand name, is historically a terrible forecaster of anything economic. On Tuesday, given the market was already in pullback mode, the IMF's forecast weighed on the financials more than it would normally.

There was no other news to drive stocks pre-market. There is a pre-earnings vacuum and there are not any warnings to fill the void. That can be good, that can be bad; typically it is pretty good given that companies don't feel compelled to warn shareholders ahead of time. Of course this time around atrocious earnings are expected and thus warning things might be worse than Armageddon could be overkill. So, with no earnings news and financial stocks lower around the globe, the US markets were stymied at the open.

A gap lower, a rebound to midmorning, an attempted consolidation through lunch, but then a second leg lower as the afternoon session started took the indices to their session lows. A last hour rally similar to Monday held some promise but the sellers came back in with 15 minutes left and drove stocks back to the prior session lows. Buyers made a half-hearted attempt to step back in but they were not ready. Sellers were in charge, but volume was quite lighter again, so it was no resumption of the harsh selloff.

This is the second day of the selling, pullback, test, whatever you want to call it. When a stock is in a solid move upside or downside it will test with a 1-2-3 pullback to support or resistance and then renew the move. Many leading stocks are in this process as are the indices; makes since as the market is made up of stocks and lead by leaders. Some are already in their third day, meaning we will be looking for them to bounce back to the upside soon if they are going to do so. If the rally is going to hold those leaders will start back up first; that is what leaders do.

Thus we are looking for some more testing Wednesday and then we see if the buyers return. The potential fly in the ointment, the monkey in the wrench? It is a shortened week as Good Friday is a market holiday. With a 3-day weekend ahead, the buyers may not be ready to return this week but take a pass so to speak until next week.

TECHNICAL. Intraday was no picture of strength. Stocks started down, moved lower then attempted a midmorning recovery. Held that move through lunch and then it was new session lows. A last hour rebound looked good until the last few minutes when it collapsed back down to the prior session lows.

INTERNALS. Breadth was significantly lower at -3.5:1 NYSE and -3:1 on NASDAQ. Most stocks were lower, leader or not. Volume shows the real story: sellers were indeed in command of the session given the losses, but they were not overrunning the market. With volume so low it was a case of sellers no longer wanting to buy right now. No surprise that is what a pullback in an upside move is: the buyers push stocks higher with their demand for equities, then back off when sated a bit, only to move back in with renewed hunger and drive prices higher. The market is definitely in the pullback stage and the buyers have yet to get hungry for stocks once more, at least through the Tuesday close.

CHARTS. The indices gapped lower as the pullback continued. Pretty simple. SP500, NASDAQ, and NASDAQ 100 sold back to near support at the 10 day EMA. SOX gapped lower and sold through its 10 day EMA, but it held above the January peak. All of this is pretty much in line with a pullback session, indeed just what you would expect. The lick log is coming Wednesday and maybe even Thursday. SP500 and 800 is a key level (805 as well) and NASDAQ at 1525ish. If SP500 holds at that level and rebounds that is a positive for the index and the financials.

LEADERSHIP. Leaders continue their pullback with the indices. As noted above, some are in their second day along with the indices (e.g. MRVL, MCHP, MA, CME), some are already on their third day (e.g. BRCM, QCOM). So far pretty much normal for the leaders, and you would start looking for QCOM to try a move back up and the others to do the same Wednesday or Thursday. In one of the last alerts for the day we noted that the market doesn't issue any guarantees and indeed actually frowns upon them. Still, there are many great stocks that have pulled back and are ready to move in when they start their moves higher.