By Jeff Clark in the S&A Short Report Direct Line:

It's 1:30 a.m. EST and the S&P futures are down 12 points.

Looks like we're going to get a gap down in the morning that wipes out all of Thursday's gains and then some.

Negative divergence should finally play out. And the volatility index should spike higher.

Yes, it took the Fed hiking the discount rate to create this move. But the market was exhausted on the upside and was ready to move lower no matter what excuse is used as the catalyst. Funny that it happens after the market rolls through nearly all short sellers' stops and takes them out of the bearish positions. Of course, then it gaps lower and prevents anyone from getting in on an easy trade.

That's how the market works. It shakes traders out of positions just before resuming the trend.

No matter how much you hear today about how the hike in the discount rate was already telegraphed and should not be a surprise, and how traders are overreacting, the discount rate hike is a game changer.

The entire rally from the low last March through the high in mid-January was fueled by easy money and by the Fed's intervention in the marketplace (we know for sure it was active in the bond market, but we can only speculate it was involved in the stock market too). Without that easy money to keep asset prices propped up there won't be as many willing buyers.

Selling pressure should prevail.

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