A choppy and indecisive session led to a third straight day of losses for the major indices, as turnover in the NYSE also picked up yesterday. Oscillating in a relatively wide range throughout the day, the S&P 500 eventually settled 0.9% lower. The Nasdaq Composite lost 1.1% and the Dow Jones Industrial Average fell 0.4%. Small and mid-cap stocks lagged behind, opposite of the relative strength they have been showing since the broad-based rally off last month's lows began. The Russell 2000 and S&P Midcap 400 shed 1.7% and 1.9% respectively. All the main stock market indexes closed near their intraday lows.

Trading activity was mixed. Total volume in the NYSE edged 2% higher than the previous day's level, but volume in the Nasdaq receded 9%. The S&P 500's loss on higher volume caused the index to register a bearish "distribution day," the first such instance of institutional selling since the S&P 500 since the current uptrend off the mid-July lows began. Nevertheless, even a moderately bullish market can handle an occasional bout of higher volume selling, especially when volume only rose modestly. The presence of two or more "distribution days" within the next week, on the other hand, would be a negative sign for the stock market's fledgling rally. We will be monitoring "under the hood" very closely in the near-term.

The largest moves in the stock market yesterday came from the commodities, as well as the companies that are correlated to them. Unfortunately for the bulls, however, those large moves were in a southerly direction. Last week, several commodity-related ETFs formed potential reversal bars on their weekly charts, but yesterday's extremely bearish action technically likely destroyed the chances for a significant bounce in the near-term. Momentum from the bearish reversal in commodities over the past month has been amazingly strong. Rather than being just a normal correction within the context of their long-term uptrends, overly negative price action in recent weeks tell us otherwise. To illustrate this, take a look at the daily chart of U.S. Natural Gas Fund (UNG):

Considering UNG was in such a strong uptrend prior to the start of its reversal early last month, it's quite surprising that the downtrend did not even pause at major support of the 200-day moving average (the thick orange line). Nearly every stock and ETF that reverses from an uptrend bounces for at least a few days on the initial test of its 200-day MA. UNG, as you can see, did not. Then, after selling momentum carried UNG well below its 200-day MA, it finally found a bit of support, then closed above the high of its near-term consolidation last Friday.