• This market correction is fixing a disconnect.

"One last thing."

 - Lt. Columbo

While I am still net short, as I wrote this morning, the good news is that market participants are beginning to recognize that profits and economic growth are slowing much faster than the consensus expectations.

This correction has begun to correct the disconnect created by higher valuations since year-end, which I discussed in Monday morning's opener.

• Here are the stocks that are most up and most down.

Here are the after-hours movers -- most are higher. 

Most Up, April 18, 4:10 p.m.

Bloomberg

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Most Down, April 18, 4:10 p.m.

Bloomberg

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• Google and Microsoft beat estimates, and IBM disappoints.

Nice beats at Google (GOOG) and Microsoft (MSFT) -- and a disappointmnt at IBM (IBM).

i suspect in looking at the big three (above)  the "goods" balance off the bad as we close the day.

As it relates to Berkshire Hathaway (BRK.B), the Oracle of Omaha's large holdings in IBM (now down $11 form the close) could ding Berkshire in tomorrow's trading.

Regarding IBM's miss, analytics were strong (this helps Qlik (QLIK)), but software and mainframe deals slipped. This continues the pall over tech on Friday.

Thanks for reading my DIary today, and enjoy your evening.

• How much to buy?

My mavens on the floor of the exchange see $110 million to buy on the close.

In terms of sectors, buys are seen in technology with $80 million and health care with $35 million -- sells are seen in only financials with $60 million

On individual stocks, buys are in Visa (V) at $80 million, Altria (MO) at $15 million and United Technologies (UTX) at $10 million -- sells are in Bank of America (BAC) at $25 million and United Parcel Service (UPS) and Dow Chemical (DOW) at $15 million each.

• Team Apple gets an extra player.

Business Insider's Henry Blodget joins the Apple (AAPL) team and buys shares.

• This is just for a very short-term, tactical play.

We are out of the Apple (AAPL) margin window, and just for a very short-term, tactical play, I have purchased a small long rental in Apple at $390.50.

• I have to reassess my short thesis.

I have covered my American Express (AXP) after going over the quarter.

I have to reassess my short thesis.

• Three shorts are performing well today.

My three shorts as plays on slowing global growth are doing well today Berkshire Hathaway (BRK.B), Danaher (DHR) and Henry Schein (HSIC).

• Here is a list.

Below are today's expected earnings after the market close.

• I see no urgency to buy until we see more selling.

I have purchased for investment but two stocks in any meaningful way in the last month: Monitise (MONI.L) and Chimera Investment (CIM).

Despite this week's market drop, the pullback has been relatively mild (as suggested earlier), and I plan to let prices come to me.

I see no urgency to buy until we see more selling or something of a panic (such as we are seeing now in Apple (AAPL)).

I continue to be of the view that most investors should err on the side of conservatism and should keep long positions modest and cash high relative to their historic profile in order to take advantage of developing opportunities.

That, or treat Mr. Market as a trading sardine, looking for short-term opportunistic trades.

The good news is that market participants are finally coming to the conclusion that economic and profit growth is moderating and will not likely achieve consensus status.

Price is what you pay; value is what you get.

• Adam Smith (Gerry Goodman): "The stock doesn't know you own it."

Apropos to my reminiscences of Adam Smith's Money Game and "Scarsdale Fats," my favorite Adam Smith (Gerry Goodman) line is "The stock doesn't know you own it."

• The recent drop is shallow relative to history.

Here is a great chart from VIX and More that plots the S&P corrections since the generational low of March 2009.

S&P 500 Pullbacks

Sources: CBOE, Yahoo!, VIX and More

View Chart »View in New Window »

So far, the recent drop is shallow relative to history.

• The third round of voting is tomorrow.

The euro came off of its high in response to another failure by the Italian parliament to elect a president (on the second ballot) but still is trading well on the day.

The third round of voting is tomorrow, and if it fails, the fourth round is based on a simple majority.

• Here is an intraday chart that underscores the weakness.

Below is an intraday chart of some leading tech companies that underscores the weakness.

Technology Stocks

Source: Bloomberg

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• Here they are.

Individual equities and ETFs:

• Largest individual equity long: Monitise (MONI.L).
• Largest individual equity short: Danaher (DHR).
• Largest ETF long: ProShares UltraShort 20+ Year Treasury (TBT).
• Largest ETF short: None.

• For old times' sake.

Back in May 1997, I started writing for TheStreet -- yup, that is nearly 16 years ago.

At that time I introduced a new column I would pen called "The Contrarian."

The objective of the column was to discover which market sectors and specific stocks were neglected and undervalued (these were purchase candidates) and to identify which were fully exploited and overvalued (these were short-selling candidates).

The late 1990s was an inauspicious time to start writing such a column, as the crazy and speculative Internet/technology stock boom was just beginning in force.

For old times' sake, I wanted to share that column with all of you. I hope you enjoy reading it:

Today's stock market is bifurcated -- it is a market of "haves and have nots." Increasingly, price action is influenced by the dominant investor of the 1990s, the mutual fund manager. With stocks in so relatively few hands, equities often move based on the strategies employed by these funds. This makes for the kind of inefficiencies and opportunities we are seeking in this column. As Warren Buffett once put it, "Our job is to be fearful when others are greedy, and greedy when others are fearful."

I have learned over the years that in the equity market, there are few truisms. Today's established doctrine often becomes tomorrow's false beliefs as conventional wisdom does not always represent common sense.

It is important to recognize that a contrarian approach can be just as foolish as a follow-the-crowd strategy. What is required is thinking rather than polling. Bertrand Russell's observation about life in general applies with unusual force in the financial world: "Most men would rather die than think. Many do."

The purpose of this column is to make investors think.

In future columns, we'll do this by taking a hard-hitting, iconoclastic look at individual securities and sectors of the market.

Our first column, however, will deal with a person, not a stock. It holds several important messages that apply, in this writer's opinion, to the current state of the stock market -- a market that may have lost its moorings¿

Four years ago this month, a dear friend of mine passed away. As the major markets register all-time highs and we move into the summer months, it seems appropriate to reflect upon my friend and to recall some of the lessons he taught me.

My friend's name was Robert Brimberg.

Bob headed Brimberg & Co., a small securities business by Wall Street standards. But by any measure Bob was a "Big Man," who hailed from Scarsdale, a toney suburb north of New York. His moniker, "Scarsdale Fats," was given to him by author Adam Smith, who immortalized Bob in his 1967 best seller, The Money Game.

In the 1960s, as in the 1990s, money managers with billions under management were welcomed anywhere. But mostly they gathered at Bob's spartan room on Broad Street, where corned beef sandwiches were the plat du jour. No house silver, no perfectly groomed waiters, just metal folding chairs, paper napkins and a big bowl of pickles and sour tomatoes were the standard offering.

Why were Bob's lunches the meal to be invited to? As Erich Heinemann recalled, "The price of admission was that you had to have something to say. Bob ran the only true salon for the investment community."

Bob put it this way: "I had to compete. What have I got? Nothing. Those hot young research analysts at Donaldson Lufkin can write hundred-page reports, Bache can field a thousand salesmen. The white-shoe firms can fly the Old St. Wasp flags. So I thought: Who has the money? The funds. Be nice. Ask them to lunch."

And that is how Bob Brimberg became the Perle Mesta of Wall Street.

Ultimately, Bob moved uptown to a corner table at Harmonie Club. It was in that setting, 20 years ago, that I met Scarsdale Fats when he invited me to my first lunch. I was a wet-behind-the-ears 27-year-old portfolio manager, and Bob exposed me to the best and the brightest on Wall Street.

Scarsdale Fats' pointed questions and sometimes brusque manner cut through the pretense, and the poker-game aspect stimulated even the most knowledgeable of us to prepare for the lunch. And everybody came, to be with the Yalie who was as comfortable talking about Kierkegaard as Keynes.

The Dow Jones Industrial stood at about 750 back in 1977, and we have been in a bull market ever since.

I, and many other people, owe a lot to Bob. Since his death and during my visits back to Harmonie Club for lunch (now as a member), I find myself gazing back to Scarsdale's corner table. I still vividly remember those spirited lunches, and how very much we profited from the conversation.

You see, Bob brought the sensibilities of a world-class bridge player -- which he was -- to our understanding of the markets. Above all, he taught us investment humility, that if you do not know who you are, Wall Street is an expensive place to find out.

Which gets me to the subject at hand. The market. For, as Bob put it to me one day in 1987, "Dougie, genius is a rising market."

And the market today again gets back to Adam Smith's Money Game, in which the author recalls a character named Billy the Kid "who was in Leasco Data Processing, Financial General, and Randolph Computer, and a couple of others I can't remember, except that they all had data processing and computers in the title. When asked why the computer leasing stocks were so good, he responded, 'Leasing has proved the only way to sell them and computer companies themselves don't have the capital. Therefore, earnings will be a hundred percent this year, and will double next year and will double again the year after. The surface has barely been scratched. The risk has barely begun.' "

As this piece is written technology is on a tear. I am awash in nostalgia: Today's investors are similarly obsessed with the future of technology, the Internet, and for that matter, the top tier of industrial equities like General Electric.

Adam Smith's fictional character, the Great Winfield, continues.

"The strength of my kids is that they are too young to remember anything bad, and they are making so much money they feel invincible. Now you know and I know that one day the orchestra will stop playing and the wind will rattle through the broken window panes and the anticipation of this will freeze us. All of these kids but one will be broke, and that one will be Arthur Rock of the new generation."

Bob, some things never change -- this is still a kid's market. Being over 40 years old has been a liability in the bull markets of the 1990s. But don't forget, it took over 17 years (1982) to eclipse the high in the averages established in the mid-'60s!

And despite the market's monumental rise, remember that prices have no memory, and yesterday has nothing to do with tomorrow. Every day starts out 50-50 (to paraphrase Professor Eugene Fama).

Sic transit gloria.

• I suspect that some of it is forced margin selling.

Based on my relationships with several margin clerks, I suspect that some of today's selling (and yesterday afternoon's as well) in Apple (AAPL) is forced margin selling.

If so, we might be close to a long rental trade in Apple, but, in any case, Apple still remains a trading sardine.

I am close to buying for a trade.

• BofA being BofA.

Regarding your comments on Bank of America (BAC), it is just BofA being BofA.

A leopard doesn't change its spots, especially when it has such long-standing legacy issues and relatively weak management!

From my perch, Bank of America is overowned and overappreciated.

• Here are some reasons.

Below are some reasons for today's market weakness:

• rumors of stress at SocGen (CAC is back in red and SocGen is -5%);
• slightly weaker domestic economic data (Philly Fed at 1.3 vs 3.0E and leading indicators at -0.1% compared to consensus of +0.1%).
• more pressure on Apple's (AAPL) shares; and
• Danaher's (DHR) weak EPS (good global economic proxy).

As I mentioned in Monday's opening missive, up until recently, the U.S. stock market had disconnected from the economic and likely profit reality -- now it is beginning to reconnect to the fundamentals.

Barring exogenous shocks, global easing and its attendant liquidity implications (as discussed this morning) should provide something of a buffer to any massive correction seen by the Cassandras.

• It might be a good time trade the SPY, but I am not pulling the lever.

I published the chart below yesterday, where there might be S&P 500 support.

We just touched the support at 1540, which might be worth a trade in here on SPDR S&P 500 ETF Trust (SPY), but I am not pulling the lever!

• I am back short Starbucks and Nationstar and added to my Grand Canyon Education short.

I have reshorted Starbucks (SBUX) and Nationstar (NSM), and I have added to my Grand Canyon Education (LOPE) short.

• Dan Greenhaus at BTIG provides a good summary.

Below is a good summary of earnings out of the gate thus far in the first quarter from my buddy/pal/friend Dan Greenhaus at BTIG!

• Again.

I reshorted American Express (AXP, small) after the so-so earnings report.

• Expectations are for 3.0.

The Philly Fed release will probably be impactful today, as growing signs of slowing growth have appeared and threaten the market advance.

Expectations are for 3.0.

• Just ringing the register.

I paid $66 for PepsiCo (PEP) a year ago.

The shares are gapping higher today (up $4.25), and I am halving the long now at $83.25.

• The company delivered disappointing guidance.

Break in: Danaher (DHR) offers disappointing guidance, and core organic growth was only 1% in the first quarter.

• Here is what the company's CFO had to say.

Interesting comments from PepsiCo's (PEP) CFO (who is confident that the company will deliver on full-year guidance):

• "I would encourage you not to increase your estimates."
• "The world remains a volatile place."
• "The company may also choose to incrementally invest in long-term value building initiatives such as advertising, innovation, and in emerging markets growth capacity."

• I will join Steve Cortes during a talk tonight in Palm Beach. 

Today at 5:30 p.m. EDT, I will be joining Steve "Hernán" Cortés "de Monroy y Pizarro," 1st Marquis of the Valley of "Fast Money," at The Society of Four Arts in Palm Beach, Florida.

The Marquis' talk is entitled "China: Economic Miracle or Dangerous Mirage?"

Steve was nice enough to contribute to a lecture I gave a year ago at The Kellogg School of Management at Northwestern University.

So I am going to reciprocate and contribute my two bits on the U.S. stock market today with him.

Should be fun.

• I'd rather short bonds than buy equities over the next few months.

I continue to prefer to be short bonds vs. long equities over the next few months.

I believe there is substantially better reward compared to risk owning ProShares UltraShort 20+ Year Treasury (TBT) than owning SPDR S&P 500 ETF Trust (SPY).

• Apple has stopped placing Mac component orders, according to a report.

Late yesterday DigiTimesreported that Apple (AAPL) has stopped placing Mac component orders.

The speculation is that Apple (among others) has misestimated the market share decline in the personal computer space.

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

Markets are stable this morning:

• S&P futures up 5;
• crude up 1.00;
• gold up 11;
• European markets up;
• euro up; and
• 10-year U.S. note yields 1.71%.

Some reasons as to why futures and risk markets are better this morning are the successful bond auctions in France and Spain as well as some progress in Italy in selecting a new president (which wouldbreak a political logjam and allow for the formation of a coalition government).

While the European economies are weak and weakening -- and the southern peripheral countries are in an economic death spiral -- ECB policies have thus far contained systemic tail risk (even with the Cyprus fiasco).

Reduced systemic risk coupled with global monetary easing probably preclude the likelihood that the perma-bears' worst scenario of a major market and economic correction will be realized.

On the other hand, it doesn't mean that we won't face an extended period of market consolidation (my base case expectation).

It remains difficult for me to see the market advance in the face of profit challenges in a slowing growth economic world -- particularly since P/E multiples have advanced so much since November (while EPS expectations have been lowered).

I am still looking for trading sardines and not eating sardines!

Below is the heavy economic calendar for today.

Yesterday we hit some levels at which I expected some support, and I covered my index shorts.

On Monday I will be writing about the importance of time frames for traders and investors and how I evaluate opportunistic trades within the context of time. This issue (i.e., what is your time frame?) in addition to your financial and risk profile are three factors that we all must deal with in judging suitability of trades/investments.

No investor or trader has the same profile, and it is sometimes hard for some subscribers to understand why I might be covering a SPDR S&P 500 ETF Trust (SPY) short even though I am still short-term bearish.

I will try to delve into that next week.