Joshua Hayes'  Instablog

European fears helped send stocks lower as Spain and Italy fears continue to gain traction. The big deal with Spain and Italy is simply the size of their economies and it is the size striking fear in the market. Sellers dominated the entire session as volume sky rocketed in panic like fashion. VIX jumped to its highest level since early March. Not a good day for those who were long the market as there isn't much to point to as a positive. The lone positive was in after-hours as Alcoa posts better than expected earnings and the stock jumping more than 5%. A very bearish day for the markets as the Big Wave Trading model goes into Sell Mode.

The difficulty here will be whether or not the market will continue to sell off here. If it does look out below as it could get really nasty. However, there is enough evidence we'll see a bounce we can short into. As of today's close the McClellan Oscillator was sitting at -377 a very extreme level. We can certainly see the market get even more oversold, but with today's reading it is hard to believe we'll fall much further.

Leading stocks didn't have much support today either, but given the size of the selling no one escaped. There are many reasons for the market to sell-off, but we know it is better to act rather than trying to figure out the reasoning. Sure, Europe is a great reason for the sell-off and Spain and/or Italy's failure would bring on some pain. But, this market has gone straight up on the back of AAPL, CMG, and PCLN. A correction here is not out of the question it is unfortunate volume kicked into hyper gear today.

Earnings season was kicked off by Alcoa during the after-hours session. The stock posted better than expected earnings and the market responded by sending the stock higher by 5%. Many will view Alcoa as the unofficial barometer for the first quarter earnings season. It will be fun to watch the entire earnings season unfold.

Cut your losses short.

Disclosure: I am short PCLN, CMG.