"Life all comes down to a few moments. This is one of them."
-Bud Fox, Wall Street

Looking back on his sixteen year career in finance, it's been Macro Man's experience that each year is often defined by a handful of critical days or events. While Bud Fox had the benefit of knowing how important his visit to Gordon Gekko's office would be, it's often not quite as obvious in real time how important an event will be.

When Ralph Cioffi's Bear Stearns hedge funds blwe up in July 2007, for example, it was viewed as in interesting development that might result in an orthodox phase of risk aversion; little did we know that it would usher in a global financial meltdown the likes of which none of us had ever seen. Similarly, when Macro Man took to the slopes on Friday, February 13 this year, he had no clue that it would become the defining day of the year for him (which happened when he blew out his knee in waist-deep powder.)

Today, on the other hand, has all the hallmarks of a potentially defining day for the rest of the year. Yesterday saw the SPX close below its uptrend line from the March lows; while prior trendlines have been violated more often than traffic laws by your average London cyclist, this time may be different. Even as the index was making new highs, the RSI was making lower highs- a classic momentum divergence that signals trend exhaustion and possible reversal.
Moreover, the market has gone down four days in a row. According to Macro Man's mate "Nick the Greek" at Citi NY, this has happened three previous times since the March 9 low: the average return on day 5 has been 1.66%. Adding spice to the chili is the release of Q3 advance GDP; with a forecast range of 2% to 4.8% around a median of 3.2%, the potential for someone to be surprised is rather large. Anyhow, the point is that if (and aat this juncture, it remains a very big if) equities put in another poor day's performance today, it may be a signal that something has changed.

Obviously, next week will also prove critical, with ISM, payrolls, and the Fed. There appears to be something of a divergence in pricing across markets. On the face of it, the dollar and equities look to be pricing in the removal of the "extended period" language, which acccording to the recent Guha article would imply that the Fed could (rather than will) raise rates within six months.