Building on the momentum from Wednesday's sell-off, stocks continued to correct from their recent gains yesterday. The Nasdaq Composite fell 4.3%, the Dow Jones Industrial Average 4.9%, and the S&P 500 5.0%. The small-cap Russell 2000 and S&P Midcap 400 indices shed 3.7% and 4.6% respectively. All the main stock market indexes finished near their intraday lows. Prior to November 5, stocks were trading in a tight range, and looked as though volatility was settling down. But with a 10% drop in the Dow over the past two days, the market's back to keeping traders and investors on their toes!

Although the major indices declined slightly less than they did the previous day, it's bearish that turnover rose this time around. Total volume in the NYSE swelled 19%, while volume in the Nasdaq increased 15%. The higher volume losses caused both the S&P 500 and Nasdaq Composite to register a bearish "distribution day," the second such day of institutional selling since the broad market formed its recent bottoming attempt on October 28. There have also been two days of higher volume gains (aka "accumulation days") during the same period. In both exchanges, market internals were about as negative as the previous day.

On November 5, when stocks began correcting from their strong rally off the lows, we focused on determining which industry sectors were showing the most relative strength to the broad market. We did so by finding the sector ETFs that were retracing less than the main stock market indexes. Generally, these ETFs these will be the first ones to rip higher when the broad market subsequently bounces again. Our recent scanning for relative strength turned up the biotech sector. To illustrate the relative strength in that sector, even through yesterday's losses, take a look at a six-day comparison of the S&P 500 Index ($SPX), overlaid with the Biotech Index ($BTK):

For those not familiar with it, the chart above is a "percentage change chart" in which we overlay two indexes or ETFs with one another. Rather than plotting the price of a stock or ETF, this type of chart merely shows the percentage change over a given period of time (six days in this case). When two symbols are overlaid with one another, this type of chart becomes a great way to quickly and easily spot sectors and ETFs with relative strength (as discussed thoroughly in my new book, Trading ETFs: Gaining An Edge With Technical Analysis).