• I added to my index shorts.

I added to my iShares Russell 2000 Index Fund (IWM) and SPDR S&P 500 ETF Trust (SPY) shorts.

• Thanks for reading my diary today, and enjoy your evening.

I am going to sign off early. I need to get all my computers operating properly, and I can't utilize them in the interim.

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

• I am about 25% net short.

• Run, don't walk, to read Helene Meisler's column on her concerns for the Nasdaq.

I mentioned Steve Cortes's negative view on the Nasdaq eaqrlier today.

The Divine Ms. M. chimed in today with a heady piece on the same subject with some great statistics! I especially liked this chart of the Nasdaq relative to the S&P 500.

• Run, don't walk.

This column on Agrium (AGU) by Paul "The" Price "Is Right" is an excellent compilation and analysis that has me thinking about Potash (POT), (I am bidding $32 for more).

• U.S. prosecutors and SAC Capital agree in principle to insider trading penalty of more than $1 billion.

Break in: U.S. prosecutors and SAC Capitalagree in principle to insider trading penalty of more than $1 billion.

• For the S&P 500 and Altisource Residential.

The S&P 500 hits another all-time high - and so does favorite Altisource Residential (RESI).

• Run, don't walk, to watch a candid interview with Larry Fink on Bloomberg TV.

I think we are going to see more trepidation from foreign investors in our bond market. How we play out this next round of debt ceiling negotiation will truly change the course or move the motivations of investors. So we have to see how this plays out. A brush of fire, a brush of Armageddon -- these debates are unacceptable. When you are a debtor nation, you should be working with your creditors and we as a nation believe that we have the ability to talk about default. When you think about other countries that have defaulted, we look worse towards those countries. There's only two countries in the world that have never defaulted, that is the United States and Switzerland. Switzerland never had a conversation about the potential of defaulting though. We are a standard-bearer country. We are the standard for the world. People look up to us. People look up to our type of democracy and they are seeing worldwide how our democracy is not working as well as it should, how our democracy used to work a lot better. As a result of that, many of our foreign investors have had conversations with me and many at BlackRock about how should they think about investing in U.S. debt over the next few years. We are trying to calm them and give them a little more support. Frankly, we need to see movement in the next three months towards a full resolution towards our budget and a full resolution related to this constant dialogue about the debt ceiling.

-- Larry Fink

Check out this candid interview with BlackRock's Larry Fink on Bloomberg TV.

• On Monitise.

This just in from Canaccord Genuity on Monitise (MONI.L) -- from my perch, this is a small deal today but a potentially big deal in 2015-2017.

Monitise has acquired full ownership of Monitise Asia Pacific, its 50:50 joint venture with First Eastern. Monitise is issuing and paying 20m shares to First Eastern for the remaining 50% stake in Monitise Asia Pacific, valuing First Eastern's stake in the joint venture at £11.25m, based on a 56.25p share price.

We believe Monitise's buyout of Monitise Asia Pacific signals greater strategic activity in the region, similar to Monitise's buyout of its UK JV partner, Vocalink, and buyout of its US JV partner, Fidelity National Information Services Inc's (FIS). Monitise bought out FIS's 51% share in Monitise Americas in October 2011 and then announced the game-changing acquisition of Clairmail in March 2012. Monitise completed the buyout of Vocalink in August 2009, around the time of its seminal agreements with Visa Inc in July 2009 and then followed up with the five year agreement with RBS in August 2011.

We expect a reinvigoration of Monitise's Asia Pacific business and a ramp up in its commercial activity over the next 18 months. A new, singularly-focused structure should allow Monitise to operate more flexibly in the fast-moving mobile money market.

We believe Monitise's buyout of its Asia Pacific JV should be value enhancing. The buyout price appears reasonable given the market potential and timing of the transaction. In October 2011, Monitise bought out FIS's 51% share in the Monitise Americas JV in return for a 3.3% stake in Monitise, valued at £18.0m (US$29.4m) based on a 35p/share issue price. In August 2009, Monitise paid £1.5m over three years and £1.5m in an earnout agreement to increase its 50% stake in the UK joint venture to 100%.

We reiterate our BUY recommendation and DCF-derived target price of 70p.

• The distortions within the data continue.

Initial Jobless Claims totaled 358,000, 23,000 more than expected but down from 373,000 last week. The Labor Department is saying again that California still has not gotten its act together in compiling its data. There was also no estimate from the Labor Department on what the private sector impact from the shutdown was within the figures. In a separate category, 70,000 government employees filed for claims but will have to give that money back as they will receive backpay.

Bottom line: The distortions within the data continue thus making it impossible to draw a conclusion.

• Here are his musings at midday.

Midday musings from Sir Arthur Cashin:

As IBM dominates, Dow traders monitor the ten year yield and the dollar.  Will ten year dip below 2.6%?  Is taper off until June?

Run rate looks a touch slower than yesterday.  At 12:30, volume projects to a final NYSE volume of 650/730.

• Illustrated.

"Fast Money's" Steve Cortes comments on IBM's (IBM) results and their implications for technology in the chart below.

IBM and Tech

Source: Steve Cortes

View Chart »View in New Window »

I agree and am short PowerShares QQQ (QQQ) -- wrong of view for now.

• Please give me a few to get my sea legs back.

I haven't made a trade, owing to my computer problems .

Please give me a few to get my sea legs back.

• I am back online in the comments section!

• The division between Wall Street and Main Street has grown deeper.

It has been my view throughout the past two weeks that:

1. there would be a last-minute compromise over the debt ceiling;
2. the market weakness (last week) over the mystery of uncertainty in Washington, D.C., should be purchased; and
3. the history and euphoria (this week) of an agreement should be sold.

While the animal spirits have anticipated a resolution and have lifted the S&P 500 by 70 handles, or by 4.5%, since last Wednesday, it remains my view that stocks have topped for the year and that stocks should now be sold.

Yesterday stocks soared.

This morning, two other asset classes soared -- namely gold (up $35 an ounce) and bonds (the ProShares UltraShort 20+ Year Treasury (TBT) dropped by $2 a share as the 10-year yield fell by 5 basis points, to 2.62%) -- signaling slowing economic growth and the prospects for a weakening in corporate sales/profits.

Meanwhile, today the U.S. dollar is taking its worse licking in a month and is moving back toward the February 2013 lows.

Below are some of the reasons behind my negative market outlook.

Hope and Can-Kicking Rule the Day

Market participants might have been somewhat naive in yesterday's celebration, as it is clear that last night's agreement again failed to incorporate any tax or entitlement reform as part of the package to a debt-ceiling extension and a clean continuing resolution. More importantly, it is not likely that the extra time bought will be used productively to achieve a grand bargain in 2014. With our snollygoster government officials simply kicking the can down the road and failing to address our growing debt problem, a normalization in interest rates coupled with U.S. demographics (the aging of our population will lift entitlement spending dramatically) will likely bring the problem back into investors' focus sooner than later.

Wash, Rinse, Repeat in Early 2014

Indeed, it is unlikely that there will ever be a grand bargain with the animosity between the two parties. (Note: On CNBC's "Squawk Box" this morning, Grover Norquist basically ruled out a Grand Bargain in his fixed view on "not a penny of new revenues." The Democrats appear just as intransigent in view.) More political partisanship lies ahead ¿ indeed, the schism between the Republicans and Democrats will likely deepen as we move ever closer to the important elections in November 2014, especially with the House of Representatives up for grabs.

At What Cost?

The cost of the Washington fiasco is likely higher than many think. Our leaders and fiscal policy are growth-deflating. Using the debt ceiling as a negotiating tactic has run the risk of a more permanent and long-lasting damage to our country's reputation and hastens the day when the U.S. dollar is no longer the world's reserve currency. (Note this morning's U.S. dollar weakness after Chinese agency Dagongdowngraded the U.S. credit rating.) If that damage occurs, the financing of our debt will grow more expensive, confidence will drop, and economic growth will be diminished.

Visibility Is Diminished

With more confusion ahead in a fiscal sense, the path of economic/profit growth is unclear as business and consumer confidence has been dented. Markets dislike uncertainty. To me, it is a leap of faith to expect the 0.6% shaved off from GDP (due to the government shutdown) to be made up in the period ahead.

The End of a Strong Profit Cycle

Last night, we saw two high-profile and likely not isolated profit disappointments -- eBay (EBAY) saw "a dramatic deceleration in U.S. e-commerce growth" and IBM (IBM) was also weak -- and more might lie ahead. Most notably, top-line misses have become commonplace -- even Goldman Sachs (GS) missed by $700 million this morning. Profit margins (which are 70% above the five-decade mean) are vulnerable to mean-reversion, and monetary policy has lost its effectiveness. I remain skeptical of the consensus view that the domestic economy will move into escape velocity and toward a self-sustaining cycle this year or next.

Quantitative Easing Has Lost Its Effectiveness

The role of stimulating growth has been squarely on the shoulders of monetary policy since 2009 as our leaders in Washington, D.C. have abrogated their fiscal responsibility. With the Fed's tools now clearly more blunt in their effectiveness, organic growth must take over. With retail (shopping center data has weakened) and housing activity already clearly eroding prior to the mess over the past few weeks, I don't see a catalyst to that organic growth. Moreover, the longer the Fed continues its current policy the more difficult it will be to extricate itself and the more likely that the market tightens (with higher bond yields ahead even if the economy remains lackluster).

Economic and Earnings Downgrades Ahead

Even before the Washington fiasco, earnings guidance has deteriorated (and is now back to early-2009 levels). The outlook has eroded further since the government shutdown started.

The Bullish Market Defense

The principal defense of the markets appears to be that the Fed is going to be easy as far as the eye can see and that interest rates will remain subdued. This, to the bulls, is support for ever-higher valuations (which have already risen from under 14x at the beginning of the year to over 16x today).

Expanding valuations could be the outcome if growth had reached escape velocity and was self-sustaining -- it has not.

The Bottom Line

With all the aforementioned cyclical headwinds and the growth-deflating confusion from Washington coupled with structural challenges to growth (particularly in the U.S. jobs market), I find it hard not to see a valuation contraction. If 2014 S&P profits rise by only 3% (my estimate) and with dividend yields at 2%, a one multiple reduction (which could prove optimistic) in P/E multiples (to 15x) means that the S&P 500 will drop next year.

My out-of-consensus view that bond yields will drop, that economic activity and profits will disappoint and that stock valuations may contract remains in place.

The division between Wall Street (stock prices and valuations marked up) and Main Street (the economy marked down) has grown deeper.

Buy the mystery of the fear over the debt deliberations (last week), and sell the history of their resolve (this week). Or, as legendary trader/investor Joe Gruss once said, "Yell and roar and sell some more."

• Still no comment.

I still don't have access to the comments section, so I can't respond (or even read) yet!

Thanks for bearing up!

• I will answer this question in a bit.

In my opening missive coming up, I will answer the all-important question posed by The Shirelles: "Will You Still Love Me Tomorrow?"

• Verizon stated that it activated under 3.9 million iPhones in the September quarter (well below the 5 million estimate). 

Apple (AAPL) could be under pressure today based on the Verizon (VZ) release, which said that the telecom activated under 3.9 million iPhones in the September quarter (well below the 5 million estimate).

• The budget wrangling has harmed the U.S.'s economic and political standing.

I am out of the office for a breakfast meeting, so my early-morning market look will return tomorrow.

Anxiety in the U.S. short-term fixed income market has eased markedly, as traders trim their bets on an imminent dislocation of the financial system that many feared would hobble growth in the world's biggest economy -- and beyond.

But the U.S. dollar is falling sharply, and gold is spiking (up $25) after a downgrade of Washington's credit rating by Chinese agency Dagong, reminding investors of the damage the budget wrangling has done to the U.S.'s economic and political standing.