Despite the fact that everyone knew the July Existing Home Sales figures were going to be bad, they were still a negative surprise. However, the Dow was down 120 points before the number. The S & P had already broke 1057 and was hanging right around 1052 when the data were released. Perhaps even more important and more negative for the market was the WSJ article saying that several FOMC members, not just Hoenig, opposed the Fed maintaining its balance sheet at the current level. Meanwhile, the market had been reacting to the Fed not being aggressive enough. The Dollar rallied, undermining the usual suspects. The housing disaster was just the icing on the cake. With the gap down open, the major averages sliced through the short-term technical support, likely causing further weakness. However, after the housing data, the Homebuilders showed some resilience. Tech was still down, as was the Russell 2000, but it wasn’t getting hammered in the usual way. It almost looked like investors were going to reverse the losses. Unfortunately, the week is young and there are more bearish reports due out this week. Today’s New Home Sales are three months post-stimulus, because they are based on “contracts” not “closings”. We could get a little positive surprise, but the GDP revision on Friday still looms large. I do think there was some short-covering under 1050. The bears had a great couple of weeks. We’re not done with the negatives yet, but I wouldn’t be surprised if we close the gap at 1067.