I think my theory on the ISM report was correct.  There is no doubt this market rally was poised to go parabolic if the ISM report was a disappointment.

As it turns out, the headline came in slightly better than consensus, and it is still in expansion mode; albeit, at a much slower pace.   Although it’s clear some investors were disappointed with the notion that 50 basis points off the table, looking inside the report, there are alarming issues. 

The massive swoon in prices echoes persistent worries about the lack of inflation, and perhaps, the beginning of deflation.  I could see investors coming back tomorrow after some spin that makes this a bigger story.  For now, the knee-jerk reaction is the Fed is at 25 bps. 

It’s going to be interesting to see how the market finishes the session. Although the rally is fading, there could be late buying.