Crude called the tune, all right. And, on Tuesday, the caller was West Texas Intermediate (WTI).

It weakened early in the equity session but then went into "pause" mode, allowing stocks to stabilize a bit.

In mid-afternoon, WTI began to weaken again and took stocks into negative territory. By 2:30, stocks looked like they were about to slip into freefall. Luckily, WTI went back into pause, which allowed equities to stabilize once again.

In the final hour, stocks were helped by indications that there was as much as $800 million to buy on balance for the close. The resultant rally stumbled a bit in the final minutes, closing up only 27 points.

My friend and fellow market veteran, Jim Brown over at Option Investor said the action was a bit odd for another reason. Here's some of what Jim wrote last night:

Needless to say it was a very volatile day and there was no direction. However, we may have traded to a stalemate. The bulls tried to manage some gains and failed. The bears tried to sell it off again and failed. In the end the indexes closed near neutral territory with no clear winner.

This was the day after a three-day weekend, which is normally bullish. It was also the day after option expiration, which is normally flat as traders square positions, resell stock that was put to them and launch new positions for the next option cycle. Post expiration Monday rarely has any direction because of the

Basically the day was a draw and tomorrow will be the directional day. The S&P needs to continue holding above that 1,867 level from August or the next target is 1,820. Resistance is now 1,900 and 1,950.



Jim failed to point out that the balance of a post-expiration week has a negative bias and the futures indicate today could give us a head start.



Overnight And Overseas – As Baron Rothschild might say – There's blood in the streets. Oil is trading below $28 (contract expires today) and equity markets around the globe are getting whacked. Hong Kong plunged the equivalent of 600 points in the Dow. Tokyo is about the same. European markets are off the equivalent of 550 points.

The ten year yield is under 2%. There was a terrorist event in Pakistan. The Saudis are cracking down on currency speculators as they tap the debt market. And southern Europe (spelled "Italy") is back on the worry list.



Consensus – Futures predict a gap down opening. That means we will likely take out last week's intra-day lows (S&P 1857). That leaves next support at 1820 (trendline) and then 1800. Oil feels like it wants to test $25. Stick with the drill – stay wary, alert and very, very nimble.