Plummeting on sharply higher volume yesterday, stocks gave a death knell to the broad market's recent rally attempt. The main stock market indexes opened substantially lower, traded sideways for a few hours, then suffered another leg down in the afternoon. The Nasdaq Composite tumbled 4.8%, the Dow Jones Industrial Average 5.7%, and the S&P 500 6.1%. The small-cap Russell 2000 lost 5.4% and the S&P Midcap 400 fell 5.9%. Fifteen minutes before the closing bell, the major indices were actually showing losses of approximately 2% more, but a quick bounce in the final minutes of trading enabled stocks to finish above their worst levels of the day.

Volume rushed higher across the board, causing the Nasdaq to register its second straight "distribution day." In both the NYSE and Nasdaq, total volume increased 20%, and also moved back above 50-day average levels. In yesterday's commentary, we said of Tuesday's sell-off in the Nasdaq, "Though it was the first display of institutional selling since the stock market's bullish reversal of October 16, it is negative to see a session of higher volume losses so soon after a high-volume reversal day." Unfortunately, this analysis proved to be right, causing downside momentum to greatly intensify yesterday.

Yesterday, we pointed out the bullish chart pattern and potential breakout of CurrencyShares Japanese Yen (FXY). Opening substantially higher, then rallying intraday, FXY is now only a point away from testing its 52-week high that was set in March of 2008. Because the currency ETFs are so sensitive to overnight price movements, we passed on re-entering FXY this time around. Nevertheless, we hope some of you took advantage of trading it after yesterday's breakout opening gap:

When Tuesday's roller coaster session led to a broad-based round of losses, the most technically damaging aspect was the higher volume in the Nasdaq. The chart patterns of the major indices, however, were still okay. Though the broad market had pulled back, it was still consolidating relatively near the highs of this week's range. But after yesterday's sizeable losses, the charts are once again looking pretty ugly. Both the S&P 500 and Nasdaq Composite settled at fresh five-year closing lows, but held above their intraday lows of October 10. Looking at the shorter-term hourly charts, one can see the overall market is in a precarious position. Below is an hourly chart of the benchmark S&P 500 Index (with moving averages removed). All the major indices are sporting similar patterns as the S&P 500: