• At 3:48 p.m. EDT, there was $1.15 billion to buy in the market on close.

• A great article here by Mike "Stormin'" Norman on the investment ramifications of the November elections.

• Here's a great summary of this week's important macroeconomic events from The Lindsey Group's Peter Boockvar:

Positives

1) Initial Jobless Claims rose by 283k, 2k more than expected but off the lowest level since 2000 last week at 266k and the 4 week average fell to 281k from 284k, the lowest since 2000. Continuing claims also fell to the lowest since 2000.

2) The lowest average 30 yr mortgage rate since May '13 at 4.10% sent refi applications up by 23.3% w/o/w after a 10.6% increase last week. It's at the best pace since November.

3) September Existing Home Sales at 5.17mm were about in line with expectations of 5.10mm. It's up from 5.05mm in August and the highest read since last September. Both single family and condos/co-op sales were up m/o/m with months' supply at 5.3, the lowest since March (it got as low as 4.4 in January '13). The median home price was up 5.6% y/o/y but at $209,700 is the lowest since April. The first time buyer remained stuck at 29% of total purchases for a 3rd straight month.

4) US Consumer prices in September rose .1% headline and also .1% ex food and energy. The estimate was flat for the headline and up .1% at the core. The y/o/y gain for both is 1.7%, unchanged from last month. Services ex energy remained sticky at 2.4% y/o/y led by a 3% increase in shelter costs. With sluggish income growth, some should not be rooting for higher inflation.

5) The UK economy continues to be the developed world's standout as Q3 GDP grew 2.8% annualized as expected bringing the year to date average to 3%.

6) The EU manufacturing and services composite index ticked up to 52.2 from 52 helped by German manufacturing but France again was weak and markit.com said this, "anyone just watching the headline number misses the darker picture painted by the survey's other indices, which show the region teetering on the verge of another downturn."

7) German consumer confidence was up a slight .1 pt off the lowest since February.

8) The Bank of Spain said the Spanish economy grew another .5% q/o/q in Q3 as its recovery continues. Their unemployment rate for Q3 fell to 23.7%, the lowest since Q4 '11.

9) Japan's manufacturing PMI rose to 52.8 from 51.7, a 7 month high.

10) Japanese exports grew by 6.9% (combining both volume and price) vs the estimate of 6.5% but imports grew by a similar amount, 6.2% vs the estimate of 2.7% driven by a 21% rise in liquid natural gas imports (the backside of a weak yen).

11) China's HSBC private sector weighted October manufacturing index was up slightly to 50.4 from 50.2.

Negatives

1) New home sales in September rose to the most since July '08 but at 467k it's 3k less than expected and August was revised down by 38k to 466k and July lower by 23k to 404k. This compares with the 30 year average of 712k. Months' supply was unchanged and prices fell a sharp 10% sequentially and 4% y/o/y as discounting becomes apparent.

2) The lowest average 30 yr mortgage rate since May '13 at 4.10% did nothing to encourage new home purchases as mortgage applications to buy a home fell 4.8% w/o/w to a 6 week low and is just a few points from the weakest since February.

3) Markit.com's measure of October US manufacturing moderated to 56.2 from 57.5 in September and 57.9 in August and is back below the 6 month average of 56.8. New orders fell to a 9 month low and export orders fell to the lowest since July. "A number of survey respondents commented on more cautious spending patterns among clients, especially in relation to export sales."

4) On a y/o/y basis, 58 of 70 cities surveyed in China saw new apartment price increases vs 19 in August, and 3 in July. On a m/o/m basis, 69 of 70 cities had price declines. A similar trend was seen for existing apartments. The air continues to come out of this bubble.

5) China's economy slowed to a growth rate of 7.3% in Q3 vs 7.5% in Q2 and that's the slowest since March '09 although was a touch above the estimate of 7.4%. Fixed asset investment YTD grew by 16.1%, the lowest rate of growth since 2001 and below the forecast of 16.3%. Retail sales also missed expectations, rising at the slowest pace since February '11 but industrial production was an upside surprise.

6) UK retail sales ex auto fuel fell .3% m/o/m in September vs the estimate of flat. The CBI total order book measuring industrial sentiment fell to -6 from -4, the weakest since July '13.

7) French business confidence held at 91 in October at the lowest since August '13.

8) Italian consumer confidence fell to an 8 month low.

9) Draghi Capital Management is going to start buying corporate bonds now? Is there not enough demand for yield from everyone else? Whose bonds are they going to buy? If they only buy investment grade, what good will that do? Are we really lacking liquidity after everything that's already been done? Who will be the first central banker that says "we've done enough"?

• Liquidity falls, too.

As can be seen in the table below, volume is34% loweron the S&P 500 and lower on all indices for this time of day compared to the last 10-day average.

S&P 500 -- Volume

Source: Bloomberg

View Chart »View in New Window »

In addition to low volume, liquidity, as demonstrated in this chart, has also deteriorated.

• Nasdaq leaders fall.

The members of Nasdaq's leadership committee -- Apple (AAPL), Amazon (AMZN), Priceline (PCLN), Netflix (NFLX), Google (GOOGL), GoPro (GPRO), Twitter  (TWTR) and Tesla (TSLA) -- are all now in the red.

• Back  to 10% net short.

I'm now back up to 10% net short. I have initiated an iShares Russell 2000 (IWM) short at $110.732 (first time, long time!).

• Just shorted more Apple.

I haven't shorted any additional Apple (AAPL) since covering a large portion of my short below $99, but I did short more Apple at $104.96 just now and will continue on a scale if the stock moves higher later in the day. I presented my case here and here.

• I wouldn't touch this stock with a 10-foot Kindle.

Today, and over the course of the past 12 months, investors have begun to take back Amazon (AMZN) CEO Jeff Bezos's "Hall Pass." Amazon continues to fail to exhibit a cash flow return on any investment it makes. I see two potential outcomes for the company in 2015:

1. Using conventional accounting methods, Amazon begins to show a profit in its existing projects. While Amazon possesses certain superior business units (e.g., its dominance in Amazon Web Services), I consider this a low probability. In this scenario, Amazon's share price will likely move towards $400 per share.
2. Investors give up and Amazon's "Hall Pass" is rescinded. I consider this a high probability. Under this scenario, Amazon's share price will likely have a date with $200 per share.

Based on conventional accounting methods, last night's third-quarter results were dreadful:

1. The rate of sales growth decelerated to +16% (I can't recall an under-20% quarterly growth rate for this company).
2. Amazon's incremental quarterly sales growth was +$2.2 billion. While most companies would convert about 25% of its marginal gains in revenues into earnings before interest, tax, depreciation and amortization (or $525 million), Amazon experienced a -$100 million EBITDA! What makes this conversion so bad is that Amazon's annual sales run rate for 2014 is approximately $910 billion.
3. Depreciation expanded by 50% in the quarter. Capital spending will rise to $6 billion, far exceeding cash flow.
4. Amazon is free-cash-flow negative.
5. The company's interest expense is rising faster than sales.
6. Competition is growing more vigorous. Based on preliminary results at (brick-and-mortar) retailers, other retailers are experiencing superior rates (in their online operations) of sales growth to Amazon.
7. Amazon is valued at 30x EBIT.

Finally, on the issue of accounting, the source of most of the unsound "new" accounting conventions and techniques has been sourced by new Internet and social media companies. But Amazon, it appears, has introduced a new convention in accounting: "constant currency," which assumes no fluctuations in exchange rates. It is calculated using a base of optimal exchange rates for the reporting company.

In last night's earnings release, Amazon highlights revenue gains at +20% while the income statement shows a gain of only +16%. (Note to self: A company cannot pay dividends or service its debt by using "constant currencies.")

Amazon -- the wonderful folks who originally delivered the concept of "stock-based compensation" -- is back on new and "inventive accounting" ground.

Accept this accounting vision reluctantly and avoid Amazon's shares.

• From Sir Arthur Cashin:

Watch crude (WTI). When it dipped to $80.50, stocks went flat to mildly negative. When back above $81, rally resumed. Remember resistance at S&P 1960/1966.

Run rate later.

• And Potash is ripping.

Newest long pick and Best Ideas member Yahoo! (YHOO) appears headed to new yearly highs shortly.

On a related note, Potash (PO) is ripping today, which I updated this morning.

• For the third time in several months.

For the third time in the last few months, I'm hedging my Northwest Bancshares (NWBI) and Citigroup (C) longs with a JPMorgan Chase (JPM) short at $58.37. The first two times were profitable, so I am hopeful!

I am doing this for a couple of reasons.

First, I am increasingly bearish on the U.S. markets. Second, I am increasingly bearish on bank stocks based on, one, a sustained level of low interest rates and the continued pressure on net interest margins; two, continued expected weak loan demand; three, a likely deterioration in capital markets activity in the months ahead; four, an end to the beneficial credit-quality-cycle improvement that has led to loan loss provision releases.

I am now back to market neutral in the bank sector. 

• "Goin' Down the Road Feelin' Bad" --Grateful Dead

Despite the support and endorsement of several high-profile hedge funds, the U.S. auto stocks continue to stink up the joint. Both Ford (F) and General Motors (GM) continue down the road lower as "Peak Autos" remain my mantra.

That said, I have taken in some of my car shorts this week as the reward vs. risk is diminishing.

• "Slip Sliddin' Away" --Paul Simon

Crude oil's slide this morning is accelerating, now down $1.50 to $80.60 per barrel.

According to U.K Prime Minster David Cameron, the island nation's membership in the European Union has been threatened by "an appalling" demand for an extra $2.5 billion or more for Brussels.

• More from Peter Boockvar:

September new home sales totaled 467k, about in line with expectations of 470k but August was revised down by 38k to 466k. This level however is the best since July '08 but of course everything is relative as the 30 year average is 712k and the 2005 peak was 1.389mm. Months' supply was unchanged at 5.3 and there was a sharp drop in the median home price which fell almost 10% sequentially and 4% y/o/y to $259k, the lowest since August '13. Whether this is the beginning of a round of discounting we'll soon see but it might be necessary in order for home builders to better compete against both existing homes for sale and rentals. Bottom line, the level of new home sales continues to creep higher but at a glacial pace and at 467k, the current level remains extremely depressed. One would hope that the new round of lows in the average 30 yr mortgage rate would lead to an improvement in sales but according to the MBA, that has yet to be seen. Refi's have been the only beneficiary so far.

• "Missed it by that much." --Maxwell Smart

Despite the business media's enthusiasm today (much like following Caterpillar's (CAT) results), I didn't think Mr. Softee's (MSFT) quarter justified the large gap higher this morning.

I tried to short the stock but just missed it.

Apparently, other investors have come to the same conclusion as the shares have reversed from a high of about $47 and have swiftly traded down in the past 15 minutes to $45.55.

This has emboldened me on my QQQ short, but the markets are not yet in agreement with me, in a market without memory from hour to hour!

• Blame the bots.

With machines and day-trading firms dominating market volume, Mr. Market has become almost unplayable now.

• Down another $1.

Crude oil, which has tended to track the S&P 500 (kill the quants before they kill us), is down another dollar to $81 per barrel this morning.

• Good for Yahoo!

I am seeing several large Alibaba (BABA) buyers again this morning, which should benefit Yahoo! (YHOO).

• In SPY, QQQ

I continue to scale into a bigger short in SPY on strength this morning. Also, added to QQQ at $98.

• I just added to my SPY short at $194.95 in premarket trading.

• From The Street of Dreams

Deutsche Bank raised its price target to $134 from $115 on Celgene (CELG), everyone's favorite biotech stock, this morning.

• Break In!

Bloomberg is reporting that a European Central Bank draft document shows 25 banks are set to fail the health check.

• "Generalissimo Francisco Franco is still dead."

Uh, that's not it at all! The real top story of the morning: Wharton Professor Jeremy Seigel, tells on CNBC that he is still bullish on the U.S. stock market. Have a good morning!

• The Gospel According to Peter Boockvar:

The Chinese housing market continues to deflate. The monthly survey of 70 cities in September showed that for new apartment units, 58 cities saw price declines vs 19 in August and 3 in July. For existing apartments, there were price drops in 52 cities vs 32 last month and 15 in the month prior. Back in December only one city of the 70 reported a price decline. The property slowdown has been a policy push for years but now that things are really rolling over, Chinese officials are doing their best in controlling the decline. How this works out will be front and center in 2015. Because the data wasn't a surprise, copper is little changed in response as was the Shanghai index which is at a one month low.

In Japan, the next fiscal policy decision is whether to increase the consumption tax again in October in the context of a Japanese economy continues to struggle with higher inflation and punk income growth. The Japanese Finance Minister Taro Aso overnight said that 'raising the sales tax would earn global trust in Japan.' He also said the BoJ is not aiming to weaken the yen, but to get out of deflation. Let's replace the words inflation and deflation with 'cost of living.' The central bank mantra is a lower cost of living is bad and we therefore need a higher one. As policy is what it is, faster income growth must be part of this experiment or else it will end badly. As the country has an extraordinary level of debt, that is where the BoJ's focus lies of course and the real reason why they want higher inflation.

In Europe, the UK (the first major economy to report Q3 GDP) economy grew 2.8% annualized in Q3. This is in line with expectations but a slowdown from the 3.6% rate in Q2. The average for the first ¾ of the year is 3%, well ahead of all developed economies. This doesn't change the equation of when the BoE will raise rates as we have no idea as the goal posts keep moving. German consumer confidence lifted by a slight .1 pts off the lowest since February while Italian consumer confidence fell to an 8 month low. We await at 6am est time Sunday the results of the ECB bank stress tests where at this point there will likely be no surprises.

The Russian ruble is moving to a fresh record low vs the US$ after Angela Merkel said "we don't see any possibility to discuss lifting sanctions at this time" as she said the cease fire is not being enforced. The S&P is deciding today and will have an announcement as to whether to downgrade Russia's credit rating to junk.

Lastly, ahead of Sunday's election, the polls in Brazil continue to flip flop. Yesterday, the Bovespa fell 3% on two polls that had Rousseff in the lead and another one today had Neves ahead.

• Where it began.

"The bottom line is that there is far too much over-confidence in the US recovery. Fragile and vulnerable in itself, the US recovery now battles against the rest of the world, which like a horror movie is dragging it down into a hellish Ice Age underworld. The problem is that at, these stratospheric valuations, the market does not need to suffer an ACTUAL recession to see a crash. Like October 1987, just the fear of recession will be enough to trigger a massive market move. ... The problem is that most risk assets, and especially equities and corporate bonds, are very expensive and priced for a long cycle. Meanwhile, this recovery has failed to generate any cyclical upward pressure to inflation - indeed quite the reverse. The global economy resembles a knackered old V8 engine which is now only firing on one cylinder (US). Hence, any data suggesting that the US economy is now also flagging were always likely to cause a meltdown as investors feared the imminent arrival of Japanese-style outright deflation. We note with interest that US 5-year inflation expectations in 5 years' time have not fallen anything like as quickly as 5y expectations. ... This suggests to me a continued misplaced market (over)-confidence about central banks' ability to control events." --Albert Edwards

The Rundown

• U.S. futures have reversed a small portion of Thursday's gains (S&P 500 futures are -6 and Nasdaq futures are -13 handles). A new Ebola case was the focus throughout the evening.
• Europe is lower by about -0.40%.
• Japan is +1.01% as the yen continues its descent. All major sub groups were higher as industrials and telecoms led.
• China is flat after an evening of no news. That said, this market has been a noticeable underperformer all week.
• Gold is +$3 per oz. and crude is -$0.71. Copper is -0.18%.
• The yield on the 10-year U.S. note is -3 bps to at 2.24%. Sovereign debt yields are mixed to slightly higher.

Global equities were mixed overnight. The feature was a new Ebola occurrence in New York City, as mentioned.

Volvo, Ericsson (ERIC) and BASF (BASFY) earnings were the highlights in Europe, while Microsoft (MSFT) and Amazon (AMZN) were the story in the U.S.

This morning's focus in the U.S. includes premarket earnings from Bristol-Myers (BMY), Cliff Natural (CLF) (beat), Nasdaq OMX (NDAQ), Procter & Gamble (PG) (in line), State Street (STT) and UPS (UPS). New homes sales will be delivered at 10 a.m. EDT.

If I had a "long only" portfolio and the flexibility, I would be reducing my invested position on the strength of the last week. I continue to believe a recession is more likely than consensus. The bottom line is that those who have been bullish have remained bullish, and those who have been bearish have remained bearish.

I remain modestly net short. I suspect today will be a day of profit-taking. I have little conviction in the market's near-term direction and my short exposure is modest. On one hand, we are moving into a seasonally strong market period. On the other hand, Europe remains a hole in the bull-market story and tax selling is likely.

I added to my Oaktree Capital (OAK) long yesterday, re-established my Caterpillar (CAT) short at around $98.80, reduced my GM (GM) short and added small to my SPDR S&P 500 (SPY) and PowerShares QQQ (QQQ) shorts late in the day.

•  3Q results are in.

I recently updated Best Ideas itemPotash (PO), the global fertilizer leader. The company reported third-quarter results that appeared lower than I had forecast but, adjusted for a higher-than-expected tax rate and lower contributions from equity investments, slightly exceeded consensus expectations, also as I expected. More important, the core fertilizer business was ahead of expectations.

But as I suggested in my previous update, the company reduced the high end of its 2014 guidance, taking it to a range of$1.75 to $1.85 from $1.70 to $1.90.

By doing so, the company raised potash sale volume to between 9 million and 9.2 million tons from 8.9 million to 9.2 million tons, and it raised gross profit guidance by $100 million and lifted nitrogen and phosphate gross margin guidance to $1.2 billion to $1.3 billion from $1 billion $1.2 billion.

Among the negatives: The effective tax rate was raised by 1% to 27% to 29%, and management lowered the forecast for equity investment to $210 million from $235 million, and slightly lowered the global shipment forecast (smaller market share).

A weaker margin environment for farmers spells a slightly below consensus 2015, as I have pointed out. I believe that is now discounted in Potash's share price.

Recent downside share price pressure could be relieved, however, as 2015 progresses. Moreover, a manageable debt-equity ratio (33%) coupled with reduced capital-spending needs point to an opportunity for Potash to expand its cash dividend payout in 2015 by at least 10%, to between $1.55 and $1.60 (providing an attractive pro-forma yield in excess of 5%).

I would be an aggressive buyer at $31 to $32.