Given that on Feb. 1st, the McClellan Oscillators for NYSE & NASDAQ went into a massive over-bought condition, the sell-off this week should not be a surprise to any avid student of our markets. Our current target is 1267 area on SPX (down to -3 sigma).
What was interesting is the intensity of big names being discarded, i.e., GOOG, RIMM, AAPL and CME. These were the darlings of Wall Street during the run-up last year.
Here is Sigma Channels for SPX Volatility Index (VIX): Given that we are still at +1 sigma, this leg down has ways to go (up to +3 sigma).
At this point, ceteris paribus, we fully expect the January lows to be exceeded (to the downside) since the reversal on Jan. 23rd did NOT come from oversold conditions and which told us (as we mentioned here before) the ensuing run-up will not be more than a dead cat bounce.