We had a mini-panic today for no apparent reason (other than exhaustion, of course). I suspect this little affair when the Nasdaq 100 index swung from +20 to -50 or thereabouts is an indication of what can happen when the robo-traders start to feed on one another to the downside. If you were watching the action today I suspect you feel the idea of a full-scale panic is not so far-fetched, after all.

Bill Fleckenstein commented about the current market’s disconnection from reality: “So, as someone who has witnessed a lot of insanity, I would say that this moment (not necessarily this morning) is perhaps the craziest I’ve ever seen, and maybe the craziest in the history of the country. Which of course doesn’t mean it can’t get crazier, because once you get to points like this, there’s no telling how wacko things can be. But my feeling has been that this will be a landslide when it goes, which is why I have continued to be on red-alert every day. ”

As thought likely, year over year expected third quarter earnings growth for the S&P 500 has turned negative and is now at -0.65%.

Also from Reuters columnist James Saft: “Retail sales rose just 0.3 percent in August, and when motor vehicles and parts were stripped out, sales fell 0.4 percent, the sharpest drop since September 2006.

Considering that people always have to eat and many Americans have only limited discretion over how much gasoline they use, a period when credit card debt is expanding rapidly while retail sales are contracting points to debt financing of necessities, rather than luxuries.”