POWERSHARES QQQ TRUST SENIOR 1 ETF (QQQQ) 43.44 -$0.22 (-0.50%) 02:34AM (15 mins delay)

Whenever the market sells off, it is good to track whether the selling marks any change in character in the health of the market. Back in June, the change in character was marked by the deepest oversold conditions since March. Those conditions deepened into July and helped provide the fuel for the next strong leg of the rally.

This latest sell-off, has produced oversold conditions even deeper than July’s. That alone is notable. However, one more thing got my attention. This sell-off marks the first time during the rally from the March lows that the market responded to earnings season by trading lower. The first ominous sign was Alcoa’s “gap and crap” after earnings. After making fresh 52-week highs, Alcoa (AA) sold off sharply, ending the day with just a 1% gain. In another two weeks, it was trading below its pre-earnings price. Intel (INTC) experienced a worse post-earnings fade. The list of notable post-earnings fades continues to grow with even favorite stocks such as Apple (AAPL) and Google (GOOG) reversing all their large post-earnings gains on Friday.