• Thanks for reading my diary and enjoy your evening.

Think, back only 24 hours, there was nary a bear on CNBC.

In fact, almost every talking head in the business media was espousing bullish fodder as the market advanced higher (and nearly earned back the prior day's loss). Worse yet, they were confident and even glib of view.

Few expressed the appropriate reservations that were being signaled by the commodities markets -- indicative of slowing domestic and EU growth as well as the deceleration in the rate of growth of China's economy.

When earnings growth forecasts drop and stocks rise (as they have this year), that means that investors are willing to pay more for earnings.

I continue to question the wisdom of higher valuations in the face of deleveraging and unprecedented secular challenges (of economic and jobs growth). The reluctance to take fiscal responsibility and the reliance on monetary policy for a temporary fix also concern this observer, particularly since the marginal impact of QE is growing weaker in its effect.

Where are the bulls today? (The answer is nowhere to be seen).

This market has no memory from day to day -- it's newsy and virtually untradable, even for the professionals.

My principal concern is that global economic growth is slowing more rapidly than the consensus recognizes, and in turn, consensus profit forecasts are in jeopardy.

Is it the end of the investment world as we know it?

Of course not.

Does any of us have a concession of what the future holds? (I certainly don't.)

As I expressed earlier in the week, the only thing certain to me is the lack of certainty.

One's long-term investment health is less a function of batting average and more a function of controlling risk and limiting losses.

Keep your powder dry, trade smaller than typical, and get ready for both trading- and eating-sardine opportunities.

Above all, be patient -- let stocks come to you, not vice versa.

Thanks for reading my diary and enjoy your evening.

• How much to buy?

My mavens on the floor of the exchange see about $325 million to buy at the close.

Sectors with buys include financials with $100 million, industrials with $92.5 million and materials with $35 million.

Sectors to sell include energy at $10 million.

Freeport-McMoRan Copper & Gold (FCX) has $22 million to buy, JPMorgan Chase (JPM) has $20 million to buy and Bank of America (BAC) has $17.5 million to buy.

To sell are Macy's (M) with $15 million and Tesoro (TSO) and Altria (MO) with $10 million each.

Is it Friday yet?

• Shares of Northwest Bancshares have made a nice upward move.

Nice move off of the low for Northwest Bancshares (NWBI)!

• Despite Europe's economic woes, I am holding onto my buy levels for the two U.S. automakers.

European car sales are sliding to a 20-year low after German concerns over the debt crisis sent demand plunging last month in the region's biggest economy and removed the main buffer protecting automakers.

Registrations in March fell 10 percent to 1.35 million vehicles, the 18th consecutive decline, with Germany's auto market plunging 17 percent, the Brussels-based European Automobile Manufacturers' Association, or ACEA, said Wednesday. First-quarter deliveries in the region dropped 9.7 percent to a record-low 3.1 million cars.

-- The Detroit News, "Europe Car Sales Head for 20-Year Low as Germany Slumps"

This Detroit News story highlights the problems facing Ford (F) and General Motors (GM) in Europe as well as the deteriorating economic outlook in the eurozone.

In my April 9 "Levels" column, I had Ford as a buy at $12.50 a share or under and General Motors at $28 a share or under.

Despite Europe's economic woes, I am holding onto the aforementioned buy levels for the two U.S. automakers, as I believe the non-U.S. industry weakness has been discounted.

• Here are the main points.

"Overall economic activity expanded at a moderate pace."

-- Fed's Beige Book

Below are the main points in the Fed's just-released Beige Book (which covers economic activity from late February to early April):

• "Most districts noted increases in mfr'g activity...with particular strength seen in industries tied to residential construction and auto's, while several Districts reported uncertainty or weakness in defense related sectors." Obviously due to sequester on latter comment.
• "Consumer spending grew modestly, and firms in some Districts cited higher gasoline prices, expiration of the payroll tax cut, and winter weather as factors restraining growth." Gasoline prices have moderated nicely of late.
• "Overall vehicle sales remained strong or increased, but sales of used auto's declined in some Districts."
• "Travel and tourism expanded across most reporting Districts, boosted by both business and leisure travel."
• "Demand for nonfinancial services increased at a modest pace, and several Districts noted growth in freight and transportation services."
• "Most Districts said residential and CRE improved markedly since the last report."
• "Home prices were rising in many areas of the country."
• "Loan demand was steady to slightly up."
• "Reports on ag conditions were mixed, as drought or cold weather adversely impacted some Districts, while others reported a strong ag sector."
• "Oil and nat gas activity remained robust...while coal production continued to decline."
• "Employment conditions remained unch or improved somewhat, and reports of hiring were most prevalent in the mfr'g, residential construction, IT, and professional services sectors."
• "Wage pressures were generally contained, although several Districts cited upward pressures in occupations experiencing labor shortages, such as IT, construction and engineering."
• "Aside from residential construction materials, price pressures remained mostly subdued."
• "Outlooks among respondents remained optimistic across sectors and Districts, with growth mostly expected to continue at the same or a slightly improved pace. Some uncertainty remained, primarily regarding fiscal policy and health care reform."

In summary, there is nothing new in the Beige Book nor is there anything that will likely alter the Fed's QE program.

From my perch, the potential problem for the Fed is if the domestic economy fails to improve from +1.5% to +2.0%, how sizable can the institution's balance sheet become before it crosses a dangerous line? After all, it is not a great thing if the Fed ends the year with a $4 trillion-plus balance sheet and has nothing to show for it!

• AP reports suspect in bombing about to be arrested.

• This market is only for the most facile and quickest traders.

Next to impossible to gauge in such a newsy backdrop. Again, err on the side of conservatism.

• Here is a schedule of some important earnings releases after the close today.

Source: Bloomberg

View Chart »View in New Window »

• Break in!

CNN reports that authorities think they have found a suspect in the Boston bombing incident.

If it is accurate and if the suspect is domestic, I believe the news could actually stabilize the market's decline.

• Namely, American Express and FedEx.

I just now covered my American Express (AXP) short as well as the balance of my FedEx (FDX) short.

• Here is a VIX chart.

Below is an illustration of market volatility.

VIX

Source: Bloomberg

View Chart »View in New Window »

• I am out of the name.

Housekeeping item: I have just covered my Nationstar (NSM) short.

• Goldman and BofA make their way to the bar car.

In Monday's opening missive, I expressed a view of slowing global economic growth.

Today, some of the Street is following us into the pool.

• How could I forget Groupon?

I am still short Groupon (GRPN).

I failed to mention it earlier.

P.S. -- Groupon is the only green stock on my monitor today! Ugh.

• And I am holding a lot of cash.

To make it clear, I am out of my SPDR S&P 500 ETF Trust (SPY), PowerShares QQQ (QQQ) and iShares Russell 2000 Index Fund (IWM) shorts now.

I am holding a lot of cash.

I have expanded my short bond position this morning and have added to Chimera Investment (CIM) and Northwest Bancshares (NWBI) longs.

• Keep average position size lower than usual, and hold an above-average level of cash.

For emphasis: I typically don't give recommendations; I simply describe why and what I am doing.

That said, the market is simply too volatile and random for most traders/investors.

Err on the side of conservatism, keep average position size lower than usual, and hold an above-average level of cash in a market without memory from day to day. 

• I am bought more shares at $12.

I am buying Northwest Bancshares (NWBI) at $12 for reasons mentioned earlier.

• The sector has returned to Earth, so I am taking in my SPY short.

The proximate reason why I reestablished my SPDR S&P 500 ETF Trust (SPY) short yesterday was the remarkable spike during the day in defensive consumer nondurables.

Today, the reverse has occurred, as the sector has returned to Earth.

As a consequence, I am taking in yesterday's SPY short now at $154.90.

I am sticking to my rule book.

Is it time to trade?

Technically speaking, maybe 1,540 on the S&P 500 provides a tradable level upon which a rally can resume.

Thoughts, Divine?

• All S&P sectors are in the red.

Yesterday we had a green pie; today Mr. Market is serving all red!

S&P 500 Sector Breakdown

Source: Bloomberg

View Chart »View in New Window »

• It reeks.

Breadth is beyond bad.

As of 10:30 a.m. EDT:

• S&P 500 --  23 advancers to 475 decliners
• NYSE -- 134 advancers to 1,718 decliners
• Nasdaq -- 333 advancers to 1,708 decliners
• Russell 2000 -- 150 advancers to 1,751 decliners

Volume on the S&P is 32% higher than the  past 10-day average, 36% higher than the past 30-day average and 30% higher than yesterday's volume for this time of day.

• The proximate cause is likely Cirrus Logic's EPS miss.

Cirrus Logic's (CRUS) EPS miss is the proximate cause for Apple's (AAPL) share price weakness.

First-quarter guidance for sales, margins and earnings were lower than forecast at Cirrus.

Below is a chart that shows Cirrus's supply chain and dependency on Apple.

Cirrus Logic (CRUS)

Source: Bloomberg

View Chart »View in New Window »

Based on our channel checks, I continue to see disappointing EPS and guidance for Apple ahead.

From my perch, Apple is a trading sardine that should be avoided for now until March's profit report and second-quarter guidance has been released.

Separately, DigiTimes says that Apple's iPad mini shipments might drop by 20% to 30% in the second quarter due to lack of demand.

• Buy the dip?

Is it finally not going to work?

• I am still long Green Mountain Coffee Roasters puts.

Housekeeping item: I have covered my Starbucks (SBUX) short but remain long Green Mountain Coffee Roasters (GMCR) puts.

• I am buying more Northwest Bancshares to capitalize on the activity.

Below is an interesting chart that supports the investment case for growing economic activity in the Marcellus area.

Source: FIG Partners

I am buying more of western-Pennsylvania-based Northwest Bancshares (NWBI) at $12.07 now.

• I know that it's tempting.

I would continue avoidingApple (AAPL) -- even as it hits a new 12-month low.

• Being aggressive at $3.16.

I am aggressively buying Chimera Investment (CIM) at $3.16 now.

• Here is a list of my shorts.

I am currently short the following stocks: American Express (AXP), Berkshire Hathaway (BRK.B), Danaher (DHR), FedEx (FDX), Nationstar (NSM) and Henry Schein (HSIC).

I think, at current prices, all these stocks are short sales.

• It remains my view that we are in a generational investment opportunity to short the U.S. bond market.

At the risk of sounding like the boy who cried wolf, it remains my view that we are in a generational investment opportunity to short the U.S. bond market.

Last May my presentation in Omaha at Whitney Tilson's Value Investing Congress delivered the case.

My base case expectation is that we are in a +1.5% to +2.0% real GDP environment in 2013.

But, as I highlighted yesterday, there is a silver lining to the sharp drop in commodities prices (particularly oil, which is a big tax cut).

Stated simply, a further drop in commodities prices will counter the decelerating domestic economy and reduce the risk of recession.

Even at 2% real growth the U.S. bond market is substantially overpriced.

And when the Fed leaves the party, the current artificiality of bond prices will be remedied.

Looking beyond this year, there will be a lot of pent-up demand for hirings, business fixed investment, etc., which could buoy aggregate growth.

I am expanding my already large short bond position in this generational opportunity.

• Basically, Europe is in trouble.

Pearls of wisdom from Southwest Securities' Mark J. Grant this morning, which supports several of my points about the Eurozone in Monday's opener.

Today's commentary is a stark overview:

Europe is in trouble.

The levitation that takes place in the early morning hours in the Euro, the incorrect counting of both assets and liabilities, massive losses hidden in securitizations at many central banks including the ECB and the riskiest of assets lined up and labeled "Risk Free" and the bells of St. Rimney's begin to chime. Unemployment at record levels, countries such as Greece, Portugal, and Cyprus that can't pay their bills without Divine intervention and economies that are rapidly shrinking even with the help of Europe's falsified accounting practices. 

Ireland is no better, France, Belgium and the Netherlands are in decline and the money created by the ECB is all that separates the Continent from Depression. The problem is, the glue is cracking, stitches are coming apart at the seams and the fantasy that has been created is now day-after-day being shown to be what it actually is; a tragedy of the first order. Every reasonable game that could be played is now an historical footnote. The new games, such as seizing depositors' money in Cyprus, aren't much fun to play.

Spain is an example here; more than 95% of their pension funds are invested in Spanish sovereign debt but 100% is encroaching and the end is nigh. Ireland is running out of cash again. Portugal is out of cash. Cyprus needs about twice as much in loans as admitted. Greece has run up a bill where every new loan pays back the European banks, pays the interest on their debt while the country sinks slowly into the Mediterranean. 

The IMF, once thought to be a stalwart institution, has helped to create the fantasy and they have lied and perjured themselves in a shameless fashion. Not one, not one projection for Europe has been anywhere close to the truth and yet they continue to minimize the damage. The IMF has partnered with the Europe and not only turns a blind eye but admits none of their own deceit and so is an accessory to the larceny both before and after the fact.

The investment of money in Europe is now a risk far greater than present yields can justify. Senior debt, subordinated debt, deposits; anything can now be taxed, confiscated or impounded at the direction of Brussels/Berlin. Nothing is safe!

Every scheme in Europe than can be rigged has been or is being rigged and, in the end, it will only be the fools that are left in this game. It is not the greater fools either but the mandated fools who take directions from Brussels who takes their directions from Berlin. 

I cannot emphasize enough the great risk that anyone takes now by investing in anything in Europe. You can ignore liabilities, you can play pretend and not count liabilities but in the end they are still there and the losses must be finally acknowledged.

Gold gave you a head's up. The margin calls in gold quickly infected the equity markets and the margin calls in stocks gave you a second head's up. The playing field is shifting and the days of wine and roses are giving way to the days of vinegar and poison ivy.

You got the warning now please try to retain your head before the guillotine of Europe removes it from your neck.

• Data over the last month suggest as much.

Back in early March 2012, I adopted an out-of-consensus and upbeat outlook for the U.S. housing market, suggesting that the residential real estate market would likely embark upon durable recovery that could last throughout the decade.

Recently, I have written that there would likely be a pause in the U.S. housing market, even though a continued recovery in the out years is likely.

The significance of this observation (if correct) is that the domestic recovery is now heavily reliant on housing to sustain growth. Without it, a more dramatic deceleration (from consensus) in the rate of real GDP (from the inventory-replenishing first-quarter 2013) is likely.

Data over the last month suggest that my concerns of a pause in the U.S. housing markets might be realized during the important spring selling season:

• In March, multifamily housing activity is improving while single-family housing starts are falling, a cautionary near-term signal. (HereCNBC's Diana Olick discusses the issue of multifamily vs. single-family construction.)
• Meanwhile forward-looking building permits last month began to weaken.

Ace real estate observer Mark Hanson chimed in this week in support of my view: 

In breaking down today's starts numbers several things popped out. Obviously, the headline is that multi-family carried the data series, which is correct.  But what got lost in the noise is how weak SFR starts were on an absolute basis ex the Southern Region:

1)Lower-end Southern region responsible for 66% of March YoY growth in SF start volume

2) Ex-Southern region starts were only up 4k houses, or an increase of a paltry $1.2bb in resi investment YoY

3) Northwest region down 8% YoY to 2nd lowest level on record

4) Western starts were up 3k units YoY while Midwest starts were only up 1k

Bottom line:  The "US housing market recovery full-blown consensus opinion" -- and obscene equities market gains in the homebuilder stocks and alike -- is centered on a revival of single-family house sales and prices that people live in;  builders fat and happy with more demand than in years;  and forecasts straight up and to the right out as many years as analyst want to model. But that isn't what the data says.

In fact, March Starts data continue to confirm the structural demand deformity of the US housing market -- and avoidance of bubble-year de-leveraging in favor of can-kicking through loan mods and foreclosure "laws" -- that has been lost amidst the flood of malinvestment by new-era institutional housing market investors into rental SFR's and multi-family. After 6 years of ZIRP, 4 of QE, and 1.5 of Twist which brought about the lowest mortgage rates ever, SF housing starts remain 'stuck in the mud'.

1) March 2006 to 2013 starts data...only 4k houses nationally ex-the Southern region.

2)  SF Starts remain stuck in the mud. There is zero evidence of "escape velocity" or a "durable" recovery when looking at these region data in the context of "post-crash".

• Let's take a quick peek of overnight and early market action.

Risk is off:

• S&P futures down -11;
• European markets down;
• euro down
• crude down -0.75;
• (fool's) gold down -10; and
• the 10-year U.S. note yields 1.71% (growth slowing).

Speaking of fool's gold, Cyprus is contemplating gold sales. It's official!

Mr. Market's action over the last week has been erratic.

Grandma Koufax used to describe untrustworthy and volatile markets by saying, "Dougie, there is something rotten in Denmark."

And I agree.

Err on the side of conservatism in a market that has no memory from day to day.

This is a market backdrop for trading sardines, not eating sardines.

While there are always attractive sectors, my mantra now is to be an opportunistic trader and, for the time being, not an investor.

From my perch, there will be plenty of time to invest at better prices and entry points.