Big Money Dumps the Market on Heavy Volume

7:00 am MT: Pre-Market: August Same Store Sales are reporting in worse than expected, so I'm going to be cautious on any Retail stocks this morning. I have several Retail stocks on my Bullish Watchlist from yesterday, but I want to see how they hold up this morning before I decide whether or not I want to play calls on them. As has been the case recently, the dropping price of oil could offset the pessimism, so we'll see how this all plays out this morning. For now, at least early in the trading day, I am just going to watch Retail and not play calls in that sector.

Weekly Jobless Claims took a jump to 444k versus the 420k expected. That was the first jump, and the first miss in several weeks. In addition, the ADP Employment Report missed expectations slightly, although the ADP report tends to be somewhat non-predictive. The negative news in employment also might keep pressure on Retail, Consumer Spending, and the market. Traders could very likely take one of two directions today. One is to wait and see how things go with the Employment Report tomorrow, which is the biggest economic report of the month, and is now in doubt.....Or two, they might decide that they don't want to wait and see how things go and sell stocks today on the speculation that the report tomorrow will miss expectations.

I'm guessing that the only thing that will prop the market up today and push it into the green is the sentiment among Big Money that the forward looking outlook is better than the backward looking outlook because of the drop in oil prices. Otherwise, the Retail comps and Employment numbers from this morning will probably keep the market grinding and consolidating today at best, and selling off at worst.

I know I keep saying this, but don't get too loaded up on your trading one way or another. If you're a directional trader, come in with short, quick swings and then hit it and get out. So if I play calls today because a drop in oil causes the market to push into the green, it will still be smaller, quicker trades. As it stands right now, I'm not anticipating doing much this morning until I see how this all sorts out.

8:45 am MT: The Dow cracked down through 11,400 and that’s it, the day is likely to finish bearish. The Naz is especially ugly. Selling is across the board. I speculated this might happen so today continues the put trading for me. One interesting stock on the bullish side is EL, which is showing amazing resilience. I have some calls on EL which I will sell later today.

8:50 am MT: I sold the PXP puts. The total trade was a 1.40 profit or 37% gain.

9:20 am MT: I sold the SWN put for a profit of .30 or 10% gain from yesterday afternoon.

10:00 am MT: Big Money may have paused yesterday, but they ramped up the selling today to continue the theme from Tuesday. Institutions are selling regardless of what they see in oil, which is actually down slightly. I have seen this behavior many times before. Fast Money and Retail Traders drift the market up in August and then Big Money comes back and slams the dumb money after Labor Day. It’s almost like they go away knowing that the cult traders will run up stocks to higher prices and then Big Money comes back and says “thank-you very much” and takes their profits. There is too much chart damage out there for the market to come back today. My market posture is shifting from intermediate term Neutral to Choppy to intermediate term Neutral to Bearish. We may see a test of the July lows. The Naz is headed for a round trip in a little over a month. So much for the Top Gun Traders.....Fast Money took the Naz up sharply on lighter volume and Big Money took it right back down on heavier volume.

11:15 am MT: I sold the NUE puts. The total trade was a 1.00 profit or 22% gain.

1:30 pm MT: I sold the EL calls for a .55 cent profit or 25% gain from yesterday. I was breakeven on the earlier calls on EL. I was amazed at the stock’s price action today in the face of the fierce selling across the rest of the market. But I’ll take the profit as a pleasant surprise and move on.

3:00 pm MT: Market Wrap: The market has officially gone IT Neutral to Bearish and I’m pretty close to plain old IT Bearish. Selling volume today was very heavy across the board. Big Money tipped its hand on Monday, and they confirmed their sentiment today. The inverse ETF of the SPX is the SDS and that is as classic a bullish breakout as you can draw up. So the market is at a pretty serious risk for a downtrend from here. A test of the July lows is definitely a good possibility, the NDX is almost there! We will have to see a good Employment Report tomorrow morning to slow or stop the selling. In addition, traders will probably be in no mood to hold much ahead of the weekend with Hurricane Hanna bearing down on the East Coast. And Hanna isn’t the monster, it’s Ike coming right behind. Hurricane Ike looks like it could be extremely serious, and traders will be paying attention to the Hurricanes next week. Normally Hurricane season garners a modest amount of interest from traders, but with a U.S. and global economy that is so sensitive to oil right now, the Hurricanes, and especially Ike, will be front and center for much of next week. So there you have it.....Even with a decent Employment Report in the morning we could still just see some wiggling and consolidating but not serious buying. Shorts may cover ahead of the weekend a little bit, but the Bulls won’t be very excited about the market until the Employment and Oil situation clears up.

It will probably take a pretty amazing Jobs Report tomorrow to get the Bulls excited and buying enough to offset the big, heavy volume sell-off from today. I speculate that we will see a decent Jobs Report and probably not a catastrophic Jobs Report. However, any miss on the numbers and the market is set to drop to the next support levels, especially a big miss. Employment and Hurricanes will be the theme for tomorrow and into next week. The next catalyst after that will probably be the FOMC Meeting on September 16, but that is shaping up to be complete non-event. If the Hurricanes don’t do nearly the damage that is expected, then oil could sell off and the stock market could catch a nice tailwind. But we won’t know the aftermath of the Hurricanes until next week. So for now, I’m more interested in puts than calls, although it won’t surprise me if we get a bounce in the next few trading days because of the breadth and depth of the recent sell-off.