Hump Day Blues

I live just outside of Beverly Hills, so the fires are not down in my neck of the woods. While I know people who have been evacuated, for the most part I get my updates from TV. But this morning when I went out to my car, it was covered in ashes. Very sad. My thoughts and prayers go out to those who have experienced losses.

Speaking of losses, this morning's tape is a sea of red in the early going. This is somewhat surprising given that the Nasdaq 100 made a new high yesterday on strong volume. But sometimes new highs bring out a violent and opposite reaction, especially when you have companies reporting earnings.

Stocks like AMZN, BRCM, and RVBD are down a ton (-15% to -30%). This is surprising given that their earnings reports weren't that bad. But that is why earnings season is a game of expectations.

Semis are down the most, followed by the brokers. Merrill (MER) said that it was writing down $7.9 billion in CDOs and subprimes, significantly more than the initial $4.5 billion estimate. This is weighing on the financials.

The above, combined with more weak housing data, is also weighing on bond yields. CNBC just reported that the feds funds are now predicting a 100% chance of another rate cut next week.

Volatility is spiking, with the VIX +18% already, and the ARMS Index above 1.85. The market looks ugly right now, but there is a ton of time left in this trading session. So let's see how the market fares into the close before jumping to any conclusions.