• My mavens on the floor of the exchange see about $300 million to buy on the close.

Sectors to buy include financials, $170 million, and health care, at $50 million.

To sell includes information technology at $60 million.

BAC has $160 million to buy, JNJ has $445 million and JPM $425 million.  

CRM has $80 million to sell and XOM $20 million.

• If I had to take one position long overnight:

It might be iShares 20+ Treasury (TLT).

Which is precisely what I intend to do.

• I am expanding my iShares 20+ Treasury (TLT) long at $102.50.

• Here's a proxy.

I have long viewed Fastenal (FAST) as a proxy for domestic economic growth.

The shares are now approaching their yearly low.

• Still not enough to warrant trading

I have been watching the tape closely today and I wouldn't be surprised if the market bottoms in here and stages an expired-feline resurrection.

The SPY appears to have stabilized at around $165.50 and any modest interest-rate relief might be the catalyst for a bit of a run higher towards day's end.

I don't think it will be strong enough (barring news) to warrant trading though.

• Back to a high.

Monitise (MONI.L) back to its high of 48 pence, up nearly 5% in a mixed tape.

A good thing.

Not selling.

• It's up 5% and back to its old high.

Monitise (MONI.L) is back to its high of 48 pence -- up nearly 5% in a mixed tape.

A good thing.

Not selling.

• Lacker says quantitative easing has been ineffectual.

Break in!

Richmond Fed President Jeffrey Lacker says first-half domestic growth confirms that quantitative easing has been ineffectual in catalyzing the economy.

My book!

• I'll delay further buying of NWBI and RESI.

In light of the rate rise today, I am holding off on my Northwest Bancshares (NWBI) and Altisource Residential (RESI) buys, despite the attractive prices after the market pullback last week.

• He says the S&P has pulled back to a key technical target.

Midday musings from Sir Arthur Cashin:

If you assume the rally from the late June low to the recent high, we have pulled back about .38, which is a classic technical target (a time to pause and reassess). (Note; In today's opener, I suggested that the S&P 500 Index could bottom between 1550 and 1600, which would be 38% decline from the November 2012 lows and the recent highs.) Working against that is slow steady pressure on 10 year (yields above 2.9% may trigger alarms).

Run rate at 12:30, projects to final NYSE volume of 560/640 million.

Summer Monday, anyone?

• The yield on the 10-Year U.S. Note is now 2.88%

• Speaking of herbalife

One of the company's largest salesmen at the top of the pyramid committed suicide in the last few days.

Here is the NY Post recount (It makes Herbela Greenberg say ... hmmm)

The shares are down by $2.50 today.

• If you're bullish, you can probably find a long-side trade.

Bank shares have come off quite a bit in the last two weeks. (I previously had a Citigroup (C) long rental which I sold at $52).

If you are more bullish than I, there is probably a trade to the long side in Bank of America (BAC), Citigroup and JPMorgan (JPM).

For now, I am staying away from the group, but my hand is on the trigger.

• Barron's picks up on it.

Early Friday morning, I reiterated my Bear Case for Retail.

Over the weekend Barron'squoted me on the subject

• Altisource

Run, don't walk, to read this Seeking Alpha story on Altisource Residential (RESI).

• Bidding for puts.

I am bidding for more Herbalife (HLF) puts now.

• Re-entering a long trade in the TLT.

Upon reflection over the weekend, I have re-entered a long rental in iShares Barclays 20-Year Plus Treasury (TLT) at $102.87.

• Bidding $30 for Potash.

I am bidding $30 for Potash (POT).

Otherwise, quiet.

• Adding to Radian Group (RDN) at $12.94 now.

• Let's take a peek at overnight and early morning price action in the major asset classes.

The rundown:

• S&P 500 futures down 1
• Nasdaq futures up 2
• Nikkei up 0.80% (July trade deficit is up amid disappointing exports and higher-than-expected imports)
• China Shanghai up 0.80% (first up day since last Tuesday)
• European market: Will the European Central Bank soon launch long-term refinancing operation (LTRO)?
• Euro up
• Crude down $0.50 per barrel
• Gold flat
• The 10 year U.S. Treasury note yields 2.86% (up 4 basis points from the prior settlement)

Worth mentioning:

• Risk Happens Fast -- Friday's U.S. market was disappointing to the bears, and stocks closed at their lows. That came after a rumored Wall Street Journal column by Jon Hilsenrath, on the Fed not tapering, didn't come to pass -- until Sunday. When the piece did come, it was not dovish.
• I Remain a Short Person -- "Don't want no short people like me? ... They got dirty little fingers and dirty little minds. They are going to get you every time." (But "Short people are the same as you and I. All people are brothers until they die.")
• 19th Nervous Breakdown or Something More Meaningful? I say the latter. I discussed this in today's opener.
• Higher Interest Rates the Proximate Cause for Market Weakness as Fed Begins to Consider Normalizing Policy -- as foreigners dump U.S. treasuries. Is this the worst-ever selling?
• PeterBoockvar ¿ "Interest rates are again higher around the world and emerging markets remain a minefield. Beginning in Asia, the Indonesian local currency 10 yr yield is jumping 17 bps as the rupiah is falling to the lowest since May '09 and the Jakarta stock market plunged 5.6% after a wider than expected current account deficit was reported after their close on Friday. The dollar denominated Indonesian 10 yr yield is spiking by 53 bps. The Thai stock market sunk 3.3% after Thailand's Q2 GDP unexpected fell by .3% q/o/q vs the estimate of up .2%. The Indian Sensex fell another 1.6% after dropping 4% Friday as the rupee falls to another record low vs the US$. While each country has their own issues, rising global interest rates triggered by a soon to be likely Fed taper obviously crimps investor risk appetite, especially foreign capital in emerging markets."
• Next Big Catalysts? July Fed minutes are due Wednesday, China purchasing managers index is set for release that evening and U.S./Europe PMI reports are scheduled for Thursday.
• Jackson Hole --a non-event?

 In the press:

• The New York Times: Grim retail outlook.
• Business Insider: Bad breadth -- this has been a theme of mine in calling for a market correction.
• Economists Outlook Blog: Bad housing breadth, too.
• Yahoo! Finance: Big name investors get louder. I wrote about this on Friday in my Diary, and a hyperbolic New York Postpicked it up over the weekend.
• WSJ/Hilsenrath: Fed quelling dissent.
• Reuters: Larry Summers will be more hawkish than Janet Yellen. John Harwood tweeted on Friday that Summers' selection odds are at 2-to-3.
• Barrons: Beware falling corporate profits
• WSJ: Decline of stock correlations
• National Journal: Republicans split on stopping Obamacare
• WSJ: U.S. manufacturing gaining ground against competition?
• WSJ: Biden in 2016?
• National Journal: Tax reform remains a long shot
• WSJ: Targeting wealthy kills jobs.

Economic and earnings catalyst that could influence the markets today:

• Slow day for data
• Reserve Bank of Australia minutes (due out Monday night)
• Detroit bankruptcy objections filing deadline
• President Obama to meet with financial regulators (including Bernanke) at the White House to discuss progress in implementing the Dodd-Frank Act. 
• Earnings scheduled after the close: Bob Evans Farms (BOBE), International Rectifier (IRF), Urban Outfitters (URBN)

• Or was it more meaningful?

You're the kind of person

You meet at certain dismal dull affairs.

Center of a crowd, talking much too loud

Running up and down the stairs.

Well, it seems to me that you have seen too much in too few years.

And though you've tried you just can't hide

Your eyes are edged with tears.

You better stop

Look around

Here it comes, here it comes, here it comes, here it comes

Here comes your nineteenth nervous breakdown.

-- The Rolling Stones, "19th Nervous Breakdown"

Was last week's market drop the real thing (a harbinger of a more significant market decline), or will it just be another nervous market breakdown (which will/should be bought)?

This is the important question that investors and traders are asking themselves this morning.

Risk Happens Fast

For nearly a month the markets have appeared undecided, with mixed economic data, conflicting sector price action (and an apparent leadership change), steadily weakening market breadth and swiftly rising interest rates characterizing the market and economic landscape.

The one-month period appears to have been resolved to the downside on Thursday (a day in which the U.S. stock market gapped lower and closed near the day's low, all on heavy volume) and on Friday (a day in which the U.S. stock market closed on its low).

Technicals, Fundamentals and Sentiment Indicators are 'Different This Time'

Last week, in The Top Ten Reasons I outlined my expectations that the market had topped for the year.

I am sticking to that forecast.

The recent market swoon appears to be different than previous corrections, as measured by the eroding technicals, weakening fundamentals (and disappointing earnings) and wavering sentiment indicators.

Deteriorating Technicals

A bad technical sign was that, by the end of the week, the total NYSE new lows reached the highest level since June.  Another profoundly negative signal was the bearish divergence between poor breadth and a market high in the weeks leading up to Thursday's schmeissing.  Importantly, Thursday's down move looked like a breakaway gap (with only a limited attempt to reverse during the day), which historically signals an early/beginning trend, compared to an exhaustion gap, which is more typically seen at the end of a move. 

Weakening/Mixed Fundamentals

Away from a battery of deteriorating technicals, there have been developing core fundamental challenges that look different than in previous periods of market weakness. 

Further pressuring and forming the likely catalyst for a drop in the market was a string of disappointing earnings from several high profile companies (Wal-Mart (WMT), Macy's (M), Cisco (CSCO), IBM (IBM), Google (GOOG), Amazon.com (AMZN), among others). This is consistent with my theme that the consensus outlook for corporate profits remains too optimistic. (The cover story in Barrons agrees with my concerns.)

Economic data appears mixed. For example, unlike any time over the last 18 months, housing appears to be stalling, and so does the rate of growth in jobs and the improvement in retail sales appear to be slowing, while some of the manufacturing data has improved modestly.

In terms of the catalyst of liquidity, we are obviously closer to a tapering of quantitative easing and normalizing monetary policy than at any time during corrections of the last two years. The uncertainty of who will be the next Federal Reserve chairman looms as a different headwind as well.

Dissimilar to previous corrections (since 2010), interest rates are climbing swiftly higher.  The yield on 5-year Treasury Notes has more than doubled and the yield on the 10-year US Note moving to 2.85% from 1.35%.

Some Complacency Exists

Also different has been the absence of put buying last week, with the 10-day CBOE put/call ratio at a low 0.85 (similar to the level seen at the May, 2013 top and compared with nearly 1.40 during the big weak day in June). Investor sentiment seems complacent, a likely  outgrowth of a number of previous corrections which have proven to be buying opportunities.

The  factors above suggest that last week's market drop is different this time and that the market's drop is more than just another nervous breakdown. 

This is in line with my view that the short-term top of two weeks ago represented something significant and that the market is doing more than just pausing/correcting in an extended cyclical bull market.

I would apply perhaps 2/3 probability that the year's high in the S&P Index has been put in and that the current decline may be more significant than previous corrections. If this is the case, the first technical stop for the S&P Index could be the June 2013 low (between 1550 and 1600), which would also coincide with the rising 200-day moving average and with a 38.2% (Elliott retracement). This would result in another 4-5% decline in the market averages.

On the other hand, the possibility remains (let's give a 33% probability) that this is simply another correction  that does no more than unravel an overbought market and is to be purchased. After all, in the most recent advance almost every index (except the Nasdaq) rose to all-time highs.

Above all, as we begin to exit the earnings reporting period, we have to closely monitor the economic data. At the core of my topping thesis is that the public and private sectors' dependence (and addiction) on low interest rates will be reflected in slowing global economic growth over the balance of 2013 and into 2014. This will likely weigh on corporate profits (estimates of which remain too optimistic).   

Looking forward (and away from the fundamentals), rallies should also be assessed by observing the leadership, market breadth and investor sentiment. Key determinants of whether we can reach new bull market highs or if we experience a rally failure and put in a more meaningful top.  

One of the most important keys that I will be looking at in order to determine this would be a more confirmed leadership shift (better relative and absolute strength) into economically sensitive industrial shares. If this occurred it would be a market positive and would favor the notion that the recent market drop is but another correction in a bull market. If not, look out below!

I will be watching rallies.

So, too, watching market breadth will be significant in assessing the balance of the year.  As well, investor sentiment as measured by the ratio of put/call buying and/or bull and bearish sentiment (in surveys) should be assessed.

My base case is that, given the body of evidence today, a correction to the S&P 500 uptrend leg (1550-1600)  that began in November 2012 is likely.   

The Bottom Line

Much is different (Read: Worse) technically, fundamentally and sentiment-wise in the current market drop compared to prior corrections. 

We will soon find out if this is another nineteenth nervous breakdown or the start of something more significant.

It remains my view that the odds favor a greater correction than the many that have preceded last week's market swoon.

Regardless of one's outlook, we will soon discover the future course of Mr. Market. Voltiare wrote, "Men argue, nature acts."

Finally, relative to my bearish view, I wanted to remind you all that Voltaire also wrote,"The composition of a tragedy requires testicles."