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Good morning. So let's see here ... As I mentioned yesterday, 2013 has started like the last three years, with the usual joyride to the upside taking hold. The rally confounded a great many investors (bulls and bears alike) as no one was really sure what was behind the big move. As such, the idea of the "great rotation" (out of bonds and into stocks due to relative valuations) was born. People piled on the bull band wagon on the back of the rotation theme and before you could find any evidence of fund managers actually doing any rotating - great or otherwise - the market became overbought, sentiment hit extremes, and the calls for a pullback began.

Until Monday, the goings on in 2013 had been pretty standard fare, nothing really out of the ordinary. As usual, the fast money had been shouting "fire" in the crowded long-stocks trade (likely because the masters of the universe had once again missed the move). And as usual, a catalyst was eventually found for the bears to sink their teeth into for a day or two. Then after a couple of down days, it looked like the bulls had rediscovered their mojo and that it would only be a matter of time until the DJIA and S&P 500 moved to new all-time highs.

But then Monday happened. Suddenly, the European debt mess was back. Suddenly, you couldn't think about owning a bank because of what might happen across the pond. According to the bears, Italy looks to be going the way of Greece. And everybody knows that Draghi and Co. can't bail out a country the size of Italy. As such, even the most ardent bulls may be starting to rethink their thesis.

If Monday's decline hadn't been tied to the resurgence of crisis across the pond, I would likely be suggesting that folks should ignore the man behind the curtain and stick with the bull camp. And if Monday's shellacking hadn't been quite so violent, I'd probably be yammering on right about now about the likelihood of a garden-variety consolidation period that would lead to another up leg in the current bull run. But ...

Don't get me wrong, I'm not saying that Monday was the start of something dark and sinister. Heck, I'm not even sure if there is more downside to come (although a test of 1460 would seem logical in the near-term). What I am saying is that the future focal point of the market is now up in the air. Thus, my question of the day is which issue or theme will win out going forward? Will the uncertainty in Italy cause traders to play the Europe card yet again? Or will the global economic recovery theme cause anyone still interested in the rotation trade to start buying the dips again? Or will it be worry about yet another spring filled with signs of economic speed bumps that dominates the action in the stock market?

The last two issues are fairly easy to deal with. All we need to do is keep our eyes open and on the data. While the January economic numbers (especially the consumer data) were likely impacted by all the hubbub about the Fiscal Cliff, by the middle of next month, we ought to be able to get a feel for how the economies of the world are faring. And in short, this should tell us whether or not there is some upside left in this bull market.

However, Europe could once again throw a monkey wrench into any straightforward analysis of the market as uncertainty can wreak havoc with an investor's theme. The good news is that this won't be our first rodeo when it comes to the European debt mess. In short, each successive encounter with the socialists across the pond has been less violent and produced less damage to the market indices. In addition, the problems in Europe are now well known and as such, there is no real element of surprise (although I will keep my fingers crossed on that one). Therefore, while Italy's trials and tribulations may cause the current pullback to become more severe than it otherwise might have been, I'm of the mind that the overall damage will wind up being limited. Unless, of course, one of the other negative themes wins out and creates a new reason to panic. Stay tuned.

Turning to this morning ... Although there is still a great deal of uncertainty in Europe, it appears that the panic in the financial markets has ended for now. Asian markets were mixed overnight while European indices are attempting to rebound this morning. And with Bernanke on tap again today and some important economic data out before the bell, U.S. futures are hovering around the unchanged mark so far.

Pre-Game Indicators
Here are the Pre-Market indicators we review each morning before the opening bell ...
Major Foreign Markets:
- Shanghai: +0.86%
- Hong Kong: +0.25%
- Japan: -1.27%
- France: +0.72%
- Germany: +0.29%
- Italy: +0.62%
- Spain: +0.69%
- London: +0.25%
Crude Oil Futures: +$0.06 to $92.69
Gold: -$9.40 to $1606.10
Dollar: higher against the yen, lower vs. euro and pound
10-Year Bond Yield: Currently trading at 1.866%
Stock Futures Ahead of Open in U.S. (relative to fair value):
- S&P 500: -0.49
- Dow Jones Industrial Average: +4
- NASDAQ Composite: -0.52
Thought For The Day ...

If your ship doesn't come in, swim out to it. - Jonathan Winters

Positions in stocks mentioned: none
Source: Daily State Of The Markets: Will Europe Trash Our Market (Again)?