• Today sets the stage for a difficult and volatile day tomorrow.

Obviously, the trading conditions were such that I couldn't produce a recap -- again, my activity t will be featured in my Market Setup tomorrow morning. At the end of the day, I sold more TBF as the slope of the global economic downturn accelerates.

During the day, Wal-Mart (WMT) lowered forward sales guidance; it's a mature company so we should not be that surprised.

But near the close, Netflix (NFLX), atypically dependable and rapidly growing company (BTIG raised NFLX's price target just two days ago), missed on domestic and international subscriber adds and shares are collapsing in after-hours trading. And eBay (EBAY) just cut its revenue guidance. The hits just keep coming.

This sets the stage for a difficult and volatile day tomorrow for the U.S. stock market, especially for the hi-octane cabal (I continue to believe that most social media stocks should be avoided). 

I am very liquid -- and that's the way most of us should be in these uncertain times.

• Break in!

Netflix (NFLX) misses domestic/overseas subscriber adds. Tomorrow might be brutal.

• Houskeeping item

I sold my Citgroup (C) at $49.60 that I purchased at $49.05 earlier today.

I am maintiaing my investment position in the stock.

• Live update

At 3:50 p.m., there is $425 million to sell market on close.

• For a loss.

I'm taking off some TBF long at $26.30 for a loss. The volatility in bonds (like equities) is too dramatic and I will revisit

• Conservatism is mandated.

To repeat, I am back into market neutral mode.

I am now very liquid, positioned well to trade opportunistically. The lack of predictability and the rising volatility mandates conservatism.

This is no time for heroics. It is time for being concerned with return of capital not return on capital.

• I don't usually give advice.

With the uncertainty and volatility, I do have one bit of advice. Get down to sleeping-size positions.

As Grandma Koufax used to say, "Dougie, I and life are too short."

• I sold all of  my QQQ long rental at $91.50 for a very small gain. 

Back to market neutral.

• Looking back ahead of time.

In five years we will look back, and today (Oct. 15, 2014) will be marked as the capitulation of the bond bears, a low of major proportions.

• I am getting a bit longer into the lows.

Now net long.

• Stop-loss

I stopped myself out of my SPDR S&P 500 (SPY) long for a loss.

• Quote of the day.

By Sir Arthur Cashin:

A retest of morning lows. Let's hope they studied for the test.

• Yesterday I re-esatablished most of my Apple (AAPL) short.

Today, I wonder if Apple is becoming a source of funds in this market beating, owing to its strong relative performance of late, and its liquidity.

The shares are now down by almost 3.5% today.

• I had a brief debate with my friend Tony Dwyer today on Bloomberg Surveillance.

Here are Tony's comments:

The market is clearly unnerved by Ebola, global economic data (incl. U.S.), and the cratering of a number of M&A situations. The bottom line is our opinion has never been about a strong global economy, it has been about the direction of earnings and what makes that happen ¿ a positive U.S. economy driven by a steep yield curve causing improved availability of money. As it relates to company releases, 3Q14 EPS and revenue reports have been above expectations so far, with solid outlooks. With 8% of S&P 500 companies having reported, 63% are beating on the bottom line with 73% beating on the top line. EPS are expected to grow 6.7% vs. a year ago, which is up from an estimate of 6.4% at the beginning of EPS reporting season (Source is Thomson I/B/E/S).

The bottom line is that we have maintained our bullish outlook despite market weakness because the fundamental backdrop remains the same: low core inflation, easy Fed, steep yield curve improving availability of money, moderate but positive economic growth and positive direction of EPS. All of this has led to a valuation expansion that began in 2011, and should continue for the coming years. The recent economic data has done nothing to change our core fundamental thesis, and intermediate-term optimism toward U.S. equities. Clearly, we did not expect such a sharp sell-off (9% intraday peak to trough), but the fundamental backdrop and historical precedent of oversold conditions outside of secular bear markets and recessions continue to suggest we are closer to the end of the decline, rather than the beginning of it as highlighted in Signposts for bottom.

Ultimately, the risk to our intermediate-term bullish view is either deflation or enough inflation that would get the Fed to be more aggressive than the market currently expects. There is little sign of either, which is why we have maintained our bullish view since the summer of 2009. In that context, where we have been wrong is underestimating the near-term risks associated with the slowing of global growth and more specifically Europe.

The near-term risk to further downside is a replay of 2011 as we approach the European Bank stress test results on October 26th. We don't expect such a dramatic decline as we saw in 2011 because the ECB was tightening in 2011 into the teeth of the European Debt Crisis vs. the currently proposed easing with an asset purchase program. As a result, we believe the intermediate-term fundamental backdrop should help recover some of the recent and current losses in the domestic equity market.

Midday musings from Sir Arthur Cashin:

Not much bounce on Europe close. Greece fell the equivalent of 1,020 Dow points.

Run rate at 12:30 projects to an NYSE final volume of 1.0 to 1.1 billion shares.

• Yeah, occasionally. 

Occasionally, I publish a column that replicates the theme of "The Chris Matthews Show" segment, "Tell Me Something I Don't Know."

Here you go.

Over the last twelve months, Intel has repurchased 250 million shares of its own stock, but the shares outstanding (year-over-year) have only beeen reduced by about 50 million shares, as the company has rewarded its management with a ton of options.

• I thought you'd all be interested in a communique to brokerages from the National Securities Clearing Corporation (NSCC), an entity that superivises virtually all broker-to-broker trades.

"Due to the current volatility in the market, NSCC may be making intraday calls for additional clearing fund this afternoon, as needed. NSCC would like to remind its Members that all calls for additional clearing fund must be met within one hour of demand. Members should have staff available to handle these calls and make arrangements with their respective banks to ensure that these calls can be met."

• A good midday update on the market from JPMorgan.

Market update ¿ the day's price action is a bit breathtaking.  Stocks dove at the open, bounced sharply, and are now bleeding lower again.  The SPX is flirting w/going red for the year (the SPX was 1848 on 12/31) and is approaching "correction" territory (a 10% pull-back would require the SPX to hit ~1817).  The stock moves are nothing though compared to the massive rally in Treasuries (10yr US yields dove all the way down to 1.86% this morning but have since climbed back >2%).  The early morning was very quiet but things started to change around ~7:15amET when the SP futures took a dip from which they have yet to recover.  The selling was "panicked" and "rushed" this morning ¿ the trends between 8 and 10amET (esp. at 8:30am after the retail sales miss) were very distinct vs. the types of selling that has been occurring over the last few weeks (very fast, very anxious, and in particular very forced).  Since 10am things have calmed a lot but the room remains better to sell (albeit only barely).  Faster-money HFs are still accounting for the majority of trading.  This is a market that continues to inflict maximum pain ¿ even before this morning performance was suffering materially in Oct (something highlighted in the WSJ overnight) while the ABBV/Shire news set off an unexpected bomb in the HF community.  Bottom Line: sentiment remains extremely negative.  "Growth is weak", "crude is signaling a growth problem", "falling rates suggest disinflation and poor growth", "Ebola is spreading", "ISIS is unstoppable", etc.  Those are some of the talking points today, just as they've been talking points for weeks (the narrative, while not false, is getting a little stale).

• Midday market musings from Sir Arthur Cashin:

As suggested, oil went negative, bringing added selling to stocks. Oil now off lows and stable. Keep watching. If WTI breaks below $80, it could get ugly for stocks.

• Another fund.

I have taken a long rental in the PowerShares QQQ (QQQ) at $91.65 just now.

• Hoiusekeeping item.

Yesterday, I took off the trading portion of my Citigroup (C) long on a sharp price gain, following the company's earnings beat.

I am back buying now at $48.98, with the shares down 5% on the day.

A good summary of today's earnings reports from Goldman Sachs (GS).

TMT

(+)INTC:  EPS: $0.66 vs. $0.65 on better Revs(14.7B vs 14.47B). Investors will like Q4 view given consensus thought probably in line off slightly higher Q3 base. Assume bears will say they don't believe the guide but only time will tell. Will be important to see INTC maintain relative strength post this beat for semi investors to have any confidence in the broader SOX index stabilizing.

(-)LLTC: In-line Q3 on both top and bottom lines (rev 371mm vs. cons 373mm, EPS 0.53 vs. cons 0.54), but weak Q4 outlook confirms cyclical correction. Q4 rev guide 348-360mm vs. cons 368.6mm. Soft guide reaffirms view (and recent datapoints) that 4Q is an inventory adjustment quarter for the analog industry, especially in industrial and auto.

(=)ADTN: Q3 EPS $0.25, revs $162.9M inline w/ pre-announced numbers. Mgmt believes the company is well positioned to take advantage of a re-acceleration of carrier spending in both Europe and the US in 2015. GS sees Q4 revs/EPS at $158M/$0.22 vs $155M/$0.22 street, with GS revs est. reflecting a 3% q/q decline which is better than normal Q4 seasonality of down ~11% given the lower Q3 bar. CC this morning at 10:30ET.

Financials

(+/=)BAC: 3Q EPS of -$0.01 vs. consensus of -$0.09. Relative to consensus, the beat came from a) slightly better than expected fee income ($10.99bn vs. $10.47bn), b) lower than expected provision expense and c) decent core operating expenses. Probably good enough quarter given beats on fee income, better credit and decent core operating expenses. The biggest pushback is probably 2% decline in end of period loans (driven by resi and C&I) ¿ will look for more color on this on the call. We lean positive on the results..  better than JPM, not as good as C..  think stock is an outperformer today.

(=/+)BLK: An operating beat on better performance fee and operating margin but flows were light. 3Q adjusted EPS of $5.21 on $2.85bn of revenue vs. consensus of $4.66 on $2.82bn. Results were partly driven by lower than expected effective tax rate (26% vs. GS estimate of 29% or about 21c benefit), so comparable EPS is closer to $5.00. Relative to consensus, the revenue beat came from better than expected performance fees ($133M vs. consensus of $102M) while adjusted operating margin of 44.2% was ahead of GS estimate of 39.3%. Total long-term flows of $28.7bn was slight of consensus estimate of $34bn and GS estimate of $38bn.

(-)KEY: A mixed/slightly worse operating quarter while outlook looks a little worse on expenses.  3Q EPS of $0.23, which included $35M or $0.03 charge related to its efficiency initiative and a pension settlement charge. It's unclear how much of the charge is already reflected in consensus. Relative to estimates, NIM/NII were in-line to a touch light at $581M/2.96% vs. consensus estimates of $584M/2.97% while loan growth (+1% qoq) was a little better than our expectation of 0.7%. Fee income of $417M was a miss relative to consensus of $446M on lower principal investing and other. Core expenses (ex charges) were a touch better at $669M vs. consensus of $685M.  In terms of outlook for 4Q, revenue looks relatively in-line with current while guidance for flat expenses on a reported basis is about $16M higher than our current estimate.

(=)PNC: Reported 3Q EPS of $1.79 vs. consensus estimate of $1.71, yet despite the EPS beat (slightly better core fee and lower provision), we think it's an inline quarter given mixed operating trends. Relative to consensus, NII was a little light at $2.1bn vs. consensus of $2.13bn as NIM came in much worse than expected at 2.98% vs. consensus of 3.04% (this was primarily driven by LCR though still concerning for forward estimates). EOP period loan was flat while average loan growth of 1% was roughly inline.  Reported fee income of $1.74bn (vs. consensus of $1.65bn) includes $57M gain on sale of V shares as well as small gains in MSR hedging. Outside of one-offs, better fee income was driven by strong asset management (Blackrock) and corporate services. Core expenses of $2.36bn were right inline with expectation while provision was a small beat ($55M vs. $80M).

Healthcare

(=)STJ: Anin line qtr with a cut in Rev guide; FY14 EPS guide narrowed but inline; cutting FY14 Rev guide by $92mn at the midpt (FX should account for ~$50mn, so need clarity on the add'l cut). Focus on the conf call: 1. Pipeline Update, 2. ICD mkt update, 3. BSX readthru from comments on mkt growth

• Adding to the ETF

I am adding further to my SPDR S&P 500 ETF (SPY) long rental at $184.30.

• Houskeeping item.

Yesterday, I shorted JPMorgan (JPM) as a hedge against my Citigroup (C) long.

I have just covered that JPMorgan hedge at $55.92.

• Re-establishing a position.

As I suggested, I have re-esatablished a small trading long rental in SPDR S&P 500 ETF (SPY) just now at $184.90.

• Should you buy today?

Sell on the first day of Rosh Hashanah and buy on the last day of Sukkot?

The last day of Sukkot is today!

• They took us down; will they pull us up?

The iShares Russell 2000 (IWM) stands out today.

It took us down before the major indices dropped -- perhaps it is a signpost of potential stability/improvement ahead.

• Markets were ill prepared for this

Mid morning musings from sir Arthur Cashin:

Opening flush had several components.  As noted in Comments: ISIS, Ebola, Greece and crude in freefall.  Add in break-up of Shire deal and very lousy data at 8:30. Initial wave of selling had aspects of forced liquidation, which surprised and overwhelmed a market ill prepared.

When crude went back into plus territory, buyers turned the herd.  Equilibrium seems to be around -190 and -230.  Watch oil.

• The market is just too fickle right now.

Here is a question every investor should be asking... is this a time to put on risk or reduce risk? 

I believe the answer is simple. Volatility is so random, event risk is so extreme and Mr. Market has steadily risen for more than three years.

Now is the time to either be on sidelines or to be reducing risk on rallies. 

• The market has turned again.

The futures have reversed 18 handles and are now down 30 again (on the day).

I am sitting tight and waiting for the "right pitch." 

• That time has come and gone.

The time to panic out of stocks was at The Ali Blah Blah Top -- not now.

Reward vs. risk is beginning to improve.

I have covered some more of my life insurers shorts.

• Adding to the position

Another day... another purchase of Monitise (MONIF).

• This retailer must be doing something right.

Bob-Ton (BONT) up second day in a row.

• Biting the bullet...

I plan to BUY the next dip (currently we are 20 handles lower).

• I'm out of SPY for a $1 short-term gain.

• Taking a SPY long rental.

I've taken a long rental in the SPDR S&P 500 (SPY) at $184.60. I'm now slightly net long.

• There is a good chance that today is capitulation.

• Let me say again ...

Ad infinitum my investment frame has been consistent recently.

Err on the side of conservatism.

This is not time to be a hero ... or a speculator.

The Ah-Ha Moment has arrived.

•  Where it began.

The rundown:

• U.S. futures are bouncing all over (now at their lows). S&P 500 futures are -16 and Nasdaq futures are -31 handles.
• Europe is broadly lower . 
• Japan is +0.92% following a quiet night of news. The yen has weakened a bit relative to the dollar. Broad gains with telecoms, discretionary, utilities, industrials, and materials all led on the upside. Energy underperformed. Nisshin Steel, IHI Corp, ANA Holdings, Bridgestone, Casio Computer, Olympus and Showa Denko all led the Nikkei higher. 
•  China is +0.68%. The inflation figures were in line. Within the market, utilities financials and tech led to the upside as telecoms and energy lagged. 
• Foreign exchange action is muted with the U.S. dollar + 0.11% and the euro -0.12%.
• Gold is -$9/oz. Crude is down another $1. Copper is -0.62%.
• The yield on the 10-year U.S. note is at 2.17%, down another four bps. Sovereign debt yields are mixed to slightly higher.

Little in the way of substantive economic news overnight. Stocks bleeding lower globally and appear fragile.

The big headlines are company/industry specific with a slew of earnings (Intel (INTC), Linear Technology (LLTC), ASML (ASML), Danone, Rio Tinto (RIO) and deal news (AbbVie (ABBV) said it may not buy Shire (SHPG) while Qualcomm (QCOM) is purchasing CSR (CSRE). 

Over here, earnings from BlackRock (BLK), PNC (PNC) and Bank of America (BAC) beat. American Express (AXP), Navient (NAVI), Kinder Morgan (KMI), eBay (EBAY), Netflix (NFLX) and Platinum Underwriters (PTP) are after the close.

Retail sales this morning and the Beige Book at 2 p.m.

Yesterday, I traded quite actively, opportunistically and well.

I made two good long rental plays in Spyders, buying in premarket and selling on morning rip. Then, again, buying the 3:30 p.m. dip and selling out near the close. 

I bid for more municipal bond funds, but got nothing.

I re-established my Apple (AAPL) short and added to Monitise (MONIF) (again!).

I shorted JPMorgan Chase (JPM) against my Citi (C) long and took off my C trading position when the stock was  up $1.50 on the day.

I start the day slightly net short, but I am making some covers in premarket trading with the futures gapping lower (-16).

• At the very least the market tranquility of the last five years is over.

Over the last two months I have argued that the U.S. stock market may have moved from a Generation Low to a Cyclical Top.

The reasons for my market concerns run deep as I see multiple peaks. 

I have argued that investors should be sellers on rallies.

By contrast, the (very much) consensus view is that the five-year Bull Market in the U.S. stock market can only be interrupted by a sharp business downturn or recession.

Those observers seem to be looking at many  traditional (and historically accurate) leading factors that are currently not signaling such a slowdown and downturn, but rather represent to them a disconnect between the global equity markets and likely global economic growth.  

As such, they argue, the recent market decline is just another opportunity to buy. 

The odds of a recession in 2015-16, according to many that look at those indicators, are less than 15%, maybe even lower.

My Contrary View of Impending Economic Weakness

I would argue that it is different this time and the risks of recession have increased.

• The Yield Curve May Not Invert Prior to a Recession
• Stock Prices Appear to Be Issuing Economic Warnings
• The Signal of the Bond Markets Might Be a Precursor to Slowing Growth
• The Signal of the Oil Markets Is Negative
• Expanding Geopolitical Risks Raise Risks 
• Growing Health Concerns Could Dent Economic Growth
• The Growing Dominance of the  U.S. Could Have a Negative Twist                                                            

The Yield Curve May Not Invert Prior to a Recession

Most importantly the beer goggles (hat tip Peter Boockvar) of unprecedented monetary easing (ZIRP and QE) have raised new and different risks to investors and, importantly, have upended those calculations that have tipped us off to a business contraction.

The best example is the structure of the yield curve. Most economists and strategists are in agreement that a bear market and recession are unlikely unless the yield curve inverts. But what happens if this rule of- thumb no longer applies as the yield curve has been distorted by the largesse of the Federal Reserve and the world's central bankers?

From my perch it is possible that the yield curve -- particularly with a new neutral (hat tip Pimco) in the federal funds rate -- may not invert in this cycle and may not necessarily issue a signal that a recession looms.

Stock Prices (Especially of a Cyclical Kind) Appear to Be Issuing Their Own Economic Warnings

One variable that few strategists have highlighted is the forward indicator of lower stock prices, especially those that are cyclically sensitive.

In the past, many have made the point that stock prices are an important leading economic leading indicator.

Look at these stocks (and asset classes) in broadly different industries and tell me what the might be signifying. 

1. Autos --General Motors(GM)  

2. Housing -- Toll Brothers (TOL)  

3. Diversified Industrials -- General Electric(GE), Eaton (ETN)  

4. Machinery/Ag/Construction -- Caterpillar (CAT) 

5. Energy -- Schlumberger (SLB) 

These charts should not be ignored.

The Signal of the Bond Markets

Then there is the chart of the 10-year U.S. note that in some measure represents future growth expectations, as well as the conspicuous outperformance of most bond-equivalent stock sectors (utilities, consumer staples, etc.) that clearly indicate an economic contraction is more likely than consensus expectations.

The Signal of the Oil Markets

The rapid fall in energy prices represents another signal that global economic growth might be foundering. (This morning the price of oil is down to $80 a barrel, or nearly 25% lower than the highs seen in June, 2014).

Expanding Geopolitical Risks

Arguably, unlike previous periods, the expansion in geopolitical risks around the globe (Middle East, Russia/Ukraine) poses an increased threat to worldwide economic growth.

ISIS, in particular, may be creating hell beyond its borders very soon. (If ISIS takes Baghdad our markets will be exposed). We would be leaving Iraq in the hands of Attila the Hun on steroids bent on killing you and me.    

This morning, several news services suggest that certain Federal officials are warning U.S. law enforcement about the threat of Islamic State-inspired terror attacks against police officers, government workers and media figures in the U.S.

Growing Health Concerns

The Black Swan of Ebola looms over the umbrella of global economic growth. (A second health worker case in Texas has been diagnosed). This is yet another different factor and headwind to worldwide economic growth.

The Rising Economic Dominance of the U.S.

The eurozone faces its third recession in three years as the region is splintered and is reluctant to confront structural issues.  

China is slowing and Russia and Japan are in recession.

The rising economic dominance of the U.S.  is growing more and more conspicuous.  While this should typically augur (relatively) well for U.S. assets, the other side of the coin is that the strength of our currency that follows is serving to reduce our export opportunities and growth aspirations.

The Bottom Line: Based on non-traditional indicators, economic risks are rising.

To this observer, the risks of recession are increasing relative to market expectations.

At the very least the market's tranquility, demonstrated almost consistently in the five-year bull market, is over.

At the worst, a recession looms over the horizon, an economic downturn that almost no one is anticipating as new and more influential and relevant factors are pressuring global economic growth.

Given my continued market and economic concerns, it is probably too late to sell and too early to buy this market.