Yesterday, I titled my blog, "Is It Safe To Come Out Now?", and today I answer myself (I talk to myself all the time). One could blame today's weakness on the terrorist attacks in Canada. But some analysts were expecting a continuation of the bearish down trend or were at least expecting a test of the support levels before heading higher. Today's drop satisfies both groups. SPX opened and traded higher this morning until the terrorist news hit the wires. SPX closed the day down $14 at $1927. RUT traded down $16 to $1097. The VIX lost about two and a half points yesterday, but gained almost two points back today. It remains a nervous market. Trading volume was flat to slightly down with 2.4 billion shares of the S&P 500 stocks trading. Trading on the NYSE dropped 1% and trading volume on NASDAQ was unchanged.

The Consumer Price Index (CPI) reported a slight increase of 0.1% for September, up from the 0.2% decline in August.

Both the SPX and RUT traded higher this morning before the terrorist attack news hit, so I am less concerned about this pull back. RUT's price action formed a bearish engulfing candlestick, known as an outside day in bar charts. By itself, that is a bearish reversal signal, but requires confirmation.

The bottom line is this: this recent market weakness is purely technical in nature. The markets became a bit frothy and now that is being corrected. The economic data and the earnings announcements thus far are not painting a bearish picture. I continue to think that traders are very nervous because of the Fed involvement in the markets; it is unprecedented and therefore makes traders nervous. It is hard to predict the future when you have no history with which to judge the present situation. That Fed presence and its unwinding, coupled with institutions sitting on gains from the last two years, make for an itchy trigger finger.