Good Morning, Traders. Wow! That's all we have to say for the strength of the selling in the morning half of the session yesterday. Although the Dow and S&P managed to close green by a hair on Thursday, important pivots were violated to the downside and on some of the nastiest internals we have seen all year. Let's break it down. During the first half of yesterday, the S&P cracked downwards as low as 1235.18, violating the prior 2006 lows by a solid 10 points. By 11 a.m., overall volume on the NYSE was running 27% higher than at 11 a.m. on Wednesday. On the Nasdaq, total turnover was ahead by 45% at the same time. This culminated in the highest volume day of the year as the NYSE went on to trade over 2.5 billion shares and the Nasdaq over 3 billion. If you have any ideas that since the Dow closed up 8 points, it's technically an accumulation day, please forget them. The breadth was very negative during the selling, moving to as low as 9 to 1 on the NYSE and almost 10 to 1 on the Nasdaq. Advance decline lines moved to -2000 on both markets and stayed there for almost two hours midday before recovering to -470 on the NYSE and -643 on the Nasdaq. Now on to the TRINs. Huge spikes higher than we have seen in some time ensued at 11:45 a.m. correlated perfectly with the new 2006 lows in the S&P and Nasdaq. Whether it was computer driven (program trading) or not, some serious selling was happening at those pivots. Although we did not close at new lows for the year, the fact that they were set yesterday and set on extremely bearish internals indicates the obvious change in sentiment. Institutional traders have been selling and that generally leads to lower markets over time. Near-term bias is sideways (200ma daily S&P) and overall bias has now shifted to bearish in the major averages.

Peter Reznicek is the Chief Equity Strategist and a principal of the Prana Fund, a domestic hedge fund, and ShadowTrader, a subsidiary of thinkorswim which provides coaching and education to its clients on both intraday and swing trading of equities. For a free trial to the full version of The Big Picture or to learn about ShadowTrader's other services, visit shadowtrader.net or send an email to preznicek@shadowtrader.net.