• Doing research.

I have a follow-up meeting with a company I'm researching, so if I don't make it back, enjoy your evening.

And God bless Uncle Vinnie.

• I'll tell you more about it tomorrow.

We all know that I'm bearish. To me, this is a market with no memory, no momentum and no motivation. It appears to be waiting for trouble to arrive. It's potentially a "Black Swan" landing strip.

But, as always, it's important to recognize that I don't have a concession on the truth. I can be -- and have been -- (very) wrong in the past!

Tomorrow morning's opening missive will discuss a potential "Golden Swan" -- one that could be viewed as an important and incremental positive for the markets and for the global economies.

What is that "Golden Swan"? The potential dissolution of OPEC.

Stay tuned. 

• Has a correction or bear market started? 

It looks increasingly possible to me that "The Ali Blah Blah Top" has occurred. Not only are fundamentals apparently falling into (or perhaps, more appropriately, out of) place, but as I mentioned in my opening, the technicals appear aligned for a correction or a bear market.

The recent bounce off an oversold condition feels "different this time."

Technically, the longer the S&P 500 stays below 1,975 to 1,980, the more worrisome the outlook might appear to some market participants.

• My average cost of today's ProShares Short 20+ Treasury (TBF) long is about $27.11.

• I plan to use any rallies to sell strength.

Indeed, in "Sell Strength" in September, I pointed out why.

Also in "How Now Dow Jones."

• Peter Boockvar on the 3-year auction.

Under the cross currents of a challenging global growth environment and a US labor market that continues to get tighter and heightens the debate of what comes next from the Fed, the 3 yr note auction was pretty good. The yield of .994% was a touch below the when issued and the bid to cover of 3.42 was the best since February and above the previous 12 month average of 3.31. The combined amount of direct and indirect bidders totaled 53%, about in line with the recent average of 52%. Bottom line, what's the Fed going to focus on when QE ends? A 5 handle on the unemployment rate for the first time since '08? The most amount of job openings since 2001? Jobless claims running below 300k? This points to a sooner rather than later rate hike. OR, the participation rate at the lowest level since 1978 and hoping this soon reverses? Still an elevated U6 unemployment rate of 11.8%? Or overseas growth showing signs of weakness that may infect the US which would all point to extreme patience in raising rates?

• More from Art Cashin:

Bounce is quite limp suggesting shorts are not intimidated.

Run rate at 12:30 projects to an NYSE final of 670-750 million share.

• From Sir Arthur Cashin:

Morning rebound ran afoul of European weakness. As Europe close approached, new waves of selling hit (maybe from Europe).

That took us down to a retest of the morning lows (circa S&P 1947). As Europe closed, pressure eased but at noon, we are still in the testing area. If test is successful, you could have a more meaningful bounce. Cross your fingers. Run rate later.

• Why closed-end munis are not boring.

For those who think that closed-end municipal bond funds (my favorite asset class for 2014) are boring, check out BlackRock Investment Quality Municipal Trust Inc. (BKN), which is up 21% since December 2013. BKN is also on my Best Ideas list.

• Between Citi and JPMorgan.

I hedged my Citigroup (C) long with a JPMorgan Chase (JPM) short Monday. The hedge is working out well with an outsized drop in JPM today.

• Morning musings from Sir Arthur Cashin:

Russell [2000] took out 1,090 (low 1,083.70) but stayed above last Thursday's morning low (1,077). That has allowed the bulls to cut this morning's losses in half. Success leads to success and some "buy the dippers" appear to have joined in.

• Housekeeping item.

In the market backdrop I see in the months ahead, I see a rotation into the defensive consumer staples sector.

Consumer staples are likely to outperform (certainly on a relative basis and possibly on an absolute basis).

As a result, I have covered my Coca-Cola (KO) short and I am taking the stock off my Best Ideas list.

• The Lindsey Group's Peter Boockvar on job openings.

While the data is somewhat dated as it's from August, the number of job openings rose to 4.84mm from 4.61mm in July and vs the estimate of 4.7mm. Gains were mostly seen in retail, hotels, and health/social services. It's the most amount of openings since January 2001 and the job opening rate rose to 3.4%, the highest since April 2001. While the demand for labor improved in August, the amount of hiring's did not as the hiring rate fell to 3.3%, the lowest since January from 3.6% in August. Whether this was due to a mismatch of skills for the jobs wanted can't be known within the data but it could also be an issue with the supply of labor not keeping up with the demand. If the case, as its seeming to be, the so called labor slack is shrinking fast and leaving the Fed less time to keep rates still at zero. The quit rate was unchanged at 1.8% for a 5th straight month at a level last seen in October '08. Bottom line, the labor market data continues to reaffirm our belief that the Fed will increase the overnight rate from the current range of zero to 25 bps to a range of 25-50 bps in March.

• Added to ProShares Short 20+ Treasury at $27.16.

Despite the (anticipated) IMF global economic growth forecasts today, I am adding to my short bond position.

My view is that slower growth is already built into the term structure of interest rates. 

I have added more TBF at an average price of $27.16 this morning.

The yield on the 10-year note is now 2.38%. I expect a gradual rise in rates in the next 1-2 quarters.

• From The Street of Dreams.

Morgan Stanley materially cuts General Motors (GM) 2014-15 profit estimates and 12-month price target (to $27 from $29).

Peak autos!

• Volatility lies ahead.

I expect, in large measure because of the heavy hand of algorithms and machines, that a volatile market backdrop lies ahead.

Already, in the market without memory from day to day, alternatively positive and negative days have become customary since mid-September.

Just look at the trading today.

The market gets schmeissed and S&P futures drop 15 handles (as momentum-based strategies push prices lower), then, the minute the S&P makes a higher high vs. the prior 15, buy orders are set off! 

This is not healthy.

And it doesn't end well, IMHO.

• I have added to my Monitise (MONIF) long on six consecutive trading days.

Today will be the seventh day I am buying more Monitise.

So you know.

• That you do so well.

UBS' technical voodoo:

Overall, yesterday's poor daily candles/daily reversal are supporting the view of a short-lived bounce and if this turns out to be true, this week would see the next test of the 2011 trend support in the S&P-500. On the intraday future side, yesterday's extreme overbought stance represented a weighing factor for the December contract and the following re-break below the formerly broken down trend line has a bearish implication. A new minor resistance is defined by yesterday's high at 1971 and minor support is at 1950. From a cyclical perspective we continue to see the SPX heading into a mid/later October low so that our focus remains on supports. A break below 1950 would shift the tactical focus to 1943 and the most significant support is defined by last week's reaction low at 1918-

• Sir Mark Grant on "A Game of Subtraction."

"I shall always consider the best guesser the best prophet." 

             -Marcus Tullius Cicero

I have consistently called for a grind-down in U.S. interest rates. I have said it since last December, I have pounded on the table about it, I have said it aloud when nearly everyone else was screaming about the higher yields to come and I have held my ground.

No flinching.

"Of all the horrid, hideous notes of woe, Sadder than owl-songs or the midnight blast; Is that portentous phrase, I told you so."

                   -George Gordon Noel Byron

The Fed, the United States government, cannot tolerate higher yields at present. They would cause havoc in the equity markets, the Real Estate market and certainly in the bond markets. At a time when the Dollar is appreciating against other currencies with notable steam and the costs of our exports are rising as a result, the country cannot afford, in my opinion will not allow, higher interest rates. Let's take a look at where we are presently:

Nation                        Five Year                   Ten Year

Germany                       0.14%                         0.90%

Austria                       0.21%                         1.10%

Netherlands                   0.29%                         1.04%

France                        0.34%                         1.25%

Spain                         0.90%                         2.15%

Italy                         1.06%                         2.34%

Japan                         0.02%                         0.08%

Hong Kong                     0.08%                         0.18%

United States                 1.68%                         2.41%

*Data supplied by Bloomberg

We currently live in a world dominated by our central banks. You can like it, love it, hate it or lump it but to ignore the reality is akin to taking a room on the Ship of Fools.

I advise you not to board.

The German 5 year yield is 1/12th of the corresponding American 5 year yield. There is not a single economic argument that can be made that supports this kind of differential. Not one, not any as in zero and nada. The spread, any rational person would have said a few years ago, is science fiction and cannot happen and yet it has happened and so it must be accounted for in a rational fashion. There is only one, just one, rational argument why it has happened and that is because the European Central Bank has made it happen.

"There is a history in all men's lives,

Figuring the nature of the times deceased,

That which observed, a man may prophesy,

With a near aim, of the main chance of things

As yet not come to life, which in their seeds

And weak beginnings lie intreasured."

                    -William Shakespeare

More startling, more unnerving even, is that the French 5 year yield is 494% less than the American 5 year yield. Put that in your pipe and smoke it. This is Antoinette in Wonderland stuff that makes eyes bigger than teacups and is non-fathomable without the inclusion of what the ECB has done. And yet 90% of the lead banks are still calling for higher American yields.

I know what they are smoking and it isn't tobacco.

At the same time all the talk of higher yields is the stuff of 6-9 months out. We have ISIS, Ebola, a new crisis daily in the Middle East, a ranting Russian leader, Ukraine at war and the savants want to discuss technical charts and American economics as if they were separated from the rest of the world.

I am so sorry to inform you of this but America is not in a parallel universe.

Stop and take a look at the yields in Japan and Hong Kong. Some money is certainly political and will be funneled as directed by the central banks but there is also money that is still directed by the return on capital and it will not reside in Europe or Asia for too long as the American yields shine brightly by comparison. In fact the yield spread have not been compressing but widening as the European yields get forced down and forced down by the ECB. You can argue and you can rant and rave but the numbers are right in front of your nose and closing your eyes will not delay the inevitable.

You can bet how you like. It is your decision to make but betting on higher interest rates is bound to play a game of subtraction with your capital.

"A man has one hundred dollars and you leave him with two dollars, that's subtraction."

               -Mae West

• Unless share prices drop meaningfully, I will not be initiating any new longs.

Over the last few weeks and months I have successfully adopted an opportunistic trading strategy, which I have described as "shorting/selling the rips and buying the dips."

This strategy is appropriate in a trendless market without memory from day to day,

It is not appropriate if we are entering a trending correction.

I have recently been of the view that the reward vs. risk in the U.S. stock market has been unattractive, so I have been more aggressive in shorting strength than in buying weakness. 

I am now fearful that we are entering a period in which there are mounting market risks and a trending market (lower) has now become my baseline expectation.

As a result, I plan to stick with my shorts rather than trading my shorts.

I have long worried about the bull market in complacency that has seems to have fermented with the sharp rise in valuations in 2013 (in which the S&P rose by more than 30% while earnings climbed by only about 8%).  

I see many peaks to consider.

Since early August I have highlighted numerous technical divergences (in the weakness of the Russell Index, new highs, the cumulative advance/decline lines, etc.), the schmeissing of the high-yield market (often seen as a precursor to stock vulnerability) coupled with growing evidence of weakening global economic growth (posing a threat to consensus corporate profit forecasts) and other factors (including valuation, sentiment and geopolitics) suggesting that a downwards trend and (potential) bear market might be in the early state of developing. 

History also shows that rising volatility in foreign exchange markets may be consistent with bear markets. (A good analysis by Nautilus Research can be found here.)

Economic weakness in Europe has been a worrisome factor that I have steadily highlighted. As I have noted, the EU (and its banking system) face structural headwinds that are not being adequately addressed.

The ECB, though impacting the euro and pushing European sovereign debt yields lower,  doesn't have the hold on its equity markets that the Fed has had. Yesterday, Europe's strongest economy, Germany, reported weak August factory orders. Today, German industrial production dropped by an outsized 4% (compared with consensus of -1.5%). As a result, the German DAX is trading at its lowest level since mid- August, below where the index sold after the September interest rate cuts and 8% below where stocks sold before the June ECB meeting when Draghi took out the heavy monetary artillery.

Over here, the domestic economy recovery (though subpar compared with prior trajectories) has been the recipient of unprecedented monetary largesse that has already begun to lose its effectiveness. The tailwind of QE is about to reverse as the Federal Reserve begins to consider raising the fed funds rate for the first time since June 2006. In doing so, our addiction to low interest rates (in both the public and private sectors) runs the risk of being exposed in 2015.

The advance in the S&P is also growing long in the tooth (having nearly tripled since The Generational Bottom in March 2009). 

Finally, the average company's share price has been eroding for several months, even in the face of the senior indices being close to their all- time highs.

I want to emphasize that most investors should not consider shorting stocks as it requires the sort of risk  discipline and hands-on approach that many can't incorporate in their personal money management.

By contrast, I have been shorting for years and feel comfortable doing so. (But I do have some core and basic tenets that I comply with in order to deal with an asset class that has -- by definition -- an asymmetric reward vs. risk).

Late yesterday (in aftermarket trading) and in premarket trading this morning I materially upped my short exposure through shorting the indices (SPY, QQQ and IWM). 

As I have been over the last two weeks, I plan to very disciplined in adding any longs over the foreseeable period. All things being equal, my only long additions will likely be in add ons (Bon-Ton (BONT), Oaktree (OAK), Yahoo! (YHOO), Monitise (MONIF), etc.).

I have a long list of potential long/buy candidates that I have been researching in recent months. But unless share prices drop meaningfully, I will not be initiating any new longs.

Most traders and investors should consider erring on the side of conservatism in this potentially more-challenging backdrop. 

• At a meeting.

There will be no Market Setup this morning as I am at a breakfast meeting with a company's management.