A Change In Character For The Market?

The market is down sharply in early trading, with the Dow on pace for its first triple digit decline on 2012. Of course, it's still early so we could see dip buyers step in again before the close. But with the markets up for 8 of the last 9 weeks, many participants would welcome seeing the market digest some of its recent gains.

There isn't much in the way of market moving news this morning, so people are reaching for headlines to attach to the selling. Some are looking at China's lower GDP forecast, but that news was out yesterday. Others are pointing to the -0.3% decline in Q4 GDP for the eurozone, but this was unchanged from the previous forecast so it's not new information. One new datapoint was Brazil posting lower growth than expected. As such the emerging markets ETF (EEM) is down -3.35% in early trading.

Asian markets were lower overnight, with China down -1.4%. Europe is lower this morning, with some chatter that there is concern about Greece's upcoming bond swap later this week. The euro is also lower today, and the flight to safety is boosting the dollar.

Commodities are lower across the board, with oil prices down near $105 and gold prices back below $1700 closer to $1672.

The 10-year yield has dipped back below 2.00% to 1.94% currently. And the big surprise is the 15% spike in the VIX that has taken it back above the 20 level to 20.60. The VIX has been in a downtrend for months, and this is the first time the VIX has been above its 50-day average since the day after Thanksgiving (11/25).

Trading comment: Today will be an interesting day. Everyone has been saying that they are waiting for a pullback in the market to do more buying. But I posed yesterday that if the decline came swiftly, it would shake the dip-buyer's confidence. We will probably hear some of that today, with people shifting their tunes and saying this is probably the beginning of a correction. Given that the sentiment indicators never reached bullish extremes, I think that this pullback will likely be of the shallow variety. As such, I want to stick my toe in the water and start to do a little nibbling today. If the market continues to slide, I will leave myself room to do more buying on further weakness.