One of the oldest clichés on Wall Street suggests that "It's not the news, but how the market reacts to the news that matters." Cutting to the chase, Wednesday's market action seemed to exemplify this concept.

While large intraday swings in stocks isn't exactly a new phenomenon, moves of more than 1 percent tend to be associated with news, rumors, or headlines. And although there was a fair amount of economic data (Retail Sales, CPI, Architectural Billing Index, and Existing Home Sales) as well as an abundance of Fed chatter, there wasn't any key piece of information that seemed to spark the 15-point decline in the S&P 500.

Bullard Started Things Off

Speaking of Fed chatter, St. Louis Federal Reserve Bank President James Bullard got into the act early on Wednesday by "talking taper" just as the S&P 500 (NYSE: SPY) was making the high of the day.

Referring to when the Fed might begin tapering their QE program, Bullard told a Bloomberg television audience, "It is definitely on the table, but it is going to depend on the data." When asked about the timing of the first taper move, he replied, "A strong jobs report, I think, would increase the probability some for a December taper."

Oh, and yes, the algos noticed Bullard's comments, which were good for six or seven S&P points in a matter of minutes.

Then The Minutes Hit

Next, the volatility and the dance to the downside picked up meaningfully upon the release of the minutes from the latest FOMC meeting. However, the strange part is the fact that the Fed minutes didn't really say much of anything - and there definitely wasn't anything new to be gleaned.

Sure, the October FOMC minutes did show that the committee had enjoyed a spirited debate on a number of topics. However, the minutes themselves did not provide any additional insight into the specific timing of when the Fed would begin tapering its QE3 program.

In fact, it was the discourse on the topic of when the taper would begin that was cited as one of the primary problems for the market (i.e. the reason the sell algos were unleashed). According to the minutes, the committee struggled to build a consensus on how they would act under different scenarios. For example, the committee members couldn't agree on what to do if the economy doesn't improve and the benefits of QE program begin to outweigh the costs.

Apparently this confusion and the fact that the FOMC did not completely close the door on tapering in December caused some traders to throw a mini "tapertantrum" yesterday afternoon.

What's The Takeaway?

So here's the takeaway. While it is unlikely that the Fed will begin to taper their QE program a week before Christmas, the committee is compelled to say that they remain "data dependent" at this stage. However, every time the algos see the words "taper" and "December" in the same paragraph, sell programs are run.

From a big-picture perspective however, the fact that stocks fell for a third straight day on #NoNews, may be telling. Remember, as the cliché goes, "It's not the news...."

Time to Take a Break?

The key here is the general consensus seems to be that it's time for the current joyride to the upside to take a break. As was discussed in yesterday's missive, there are lots of reasons to be nervous right now. The length of the bull market. Earnings. Valuations. Sentiment. Economic growth. The taper, etc. As such, the vast majority of traders appear to be playing for a pullback right now. And sometimes, these things become self-fulfilling.

But here's the rub. The same folks that are pounding the table about a pullback needing to happen right here and now are also the ones who have been dead wrong all year. Oops.

Sure, stocks are extended. And yes, this rally has run an awfully long way. Oh, and the amount of time that has elapsed since the last correction of 10 percent or more is now quite long. But, it is also important to recognize that Ms. Market doesn't generally appease the masses.

So, while the algos are able to push the indices around in the near-term, the bears have been largely unsuccessful this year. Therefore, unless a real reason comes along, the buy-the-dip crowd may just continue to do their thing into the end of the year.

Turning to this morning... The back-and-forth relating to expectations of when the Fed may or may not taper their QE program continues to be the focal point this morning. However, there is a fair amount of data for traders to review this morning as Eurozone and China flash PMIs are out. In addition, there is a slew of data to be released here in the U.S. before 10:00 am eastern. But so far at least, U.S. futures appear to be in rebound mode after a three-day slide.

Positions in stocks mentioned: none

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