Tumultuous swings overnight almost exceeded the Monday carnage; and certainly were wilder in terms of directional shifts than anything else seen. That of course resulted from the collapse of the XIV, by 90%. It was 1929 for the crowd we warned that constantly poured money into selling volatility. 
 

So XIV was halted along with 'all' futures contracts in Asia at one point; and that calmed things a bit. It also was halted multiple times Tuesday during NYSE hours. You had an overnight rebound in the S&P; and after another morning quick purge, you got a Tuesday turnaround (our normal preferred pattern); but it wasn't that simple; and even the Dow Industrial Average traversed more than 1000 points in Tuesday's first hour.

Markets have been wounded; but there is not a systemic danger for now (which doesn't mean markets can't bounce around and work lower over a period of time); but does mean this won't be an immediate financial or other system crisis requiring the Plunge Protection Team or similar Fed interventions to stabilize matters. An orderly progressive decline is fine.

Many stocks (Apple (AAPL) is one key issue to monitor) are below their 200-day Moving Averages; and many more in various states of correction. Might even be notable to observe which stocks are little changed by all this (a sign of reduced risk in some cases). Crude Oil stabilized (still in the mid 60's by the way); and the XOI (oil stocks) stopped plummeting; that was very important to the market as well.

The economy and Nation are strengthening; and market structural issue concerns are not new. The issues of 'risk' arising from 'passive investing' are not new; and Carl Icahn is correct about that, even if dismissed as a self-interest perspective by media commentators. I agree not because of his disdain for 'groups' that can swing an individual stock regardless of a good or bad fundamental backdrop for the individual company; but since he is correct. (He doesn't like his investments rocked by things; I'm just referring to the impact focusing on Indexes and ETFs has; so I concur.)

Earnings and interest rates are issues of course. A reset of everything I have addressed (both bullishly for just over 15 months now since before the Election) and increasingly concerned with the absurd parabolic rush in January (which some thought bullish; and I said very dangerous).

In sum: in my opinion any 'above rising tops parabola', which has those lower rising bottoms, above what was a previous rising tops; technically is (as I observed repeatedly) the final phase of a upward thrust that's on thin ice. Professionals 'should' have known this; and I think did while so many tended to paper over that by rationalizing.

A most egregious evidence of pressure (if not simply error) was curious bullish rationales even after the 10-year moved over 2.6, which for many of the very same analysts was an 'inflection point'. Given Fed statements on policy for several months; I thought it was a given that the 10-year of course was going to hit that level; and more. I ponder whether pressure was made for analysts to put a different public face on market conditions but also noted the record fund-flow into 'short-vol' strategies last week; a visibly insane move; in the face of an already rumbling stock market.

Bottom line:  We got the 'crash of 2018'; but it's not (and shouldn't be) at the percentage level of history's greatest (it was history's largest points).

Normally a period of quiescence (aside 'Hail Mary' recoveries) follows a day like Monday; and we didn't really get that because the 'fault lines' of course were still unsettled as we came into the Tuesday session. By the time it was all said and done we remain with the continued concern that lies out there; even as everyone (myself included) does not discern any serious impact on market functions or systemic risks. Financial concern remains; and the easing on the rate front may only be temporary.

The rolling-off of Quantitative Easing remains a prospect this year. The Fed wants the reduction of its Balance Sheet to proceed irrespective of interest rate hikes; and that's perhaps what many are missing when they find solace should the Fed not move. (Rates can firm anyway overall as it becomes a supply/demand issue; regardless of the Funds rate itself.)