Rough start to trading Thursday has gold stocks down 4 to 7 percent, and the strong dollar pressuring commodities, with aluminum, zinc, copper, and nickel all down about 2 percent.
Some of this decline may be due to China, where factory output fell to a nine-month low. And word that Chinese authorities are tightening credit didn't help.
For all the angst today, here's the bottom line: the Federal Reserve said the economy was improving, sending markets into a swoon (although the S&P 500 is only roughly 3 percent below its historic high). Have investors overreacted?
As far as I can see, most economist believe there needs to be roughly 200,000 jobs created each month for unemployment to reach 7 percent by mid-2014, even assuming the labor force participation rate remains flat. But is that realistic?
In the last five months, the gains have averaged 189,000 per month, but that only because of a mammoth 332,000 job gain in February. In light of this, the target seems very ambitious. Even if the labor force participation rate increases, and it may if the economy is improves enough, then the numbers required to get near 7 percent go way up — 250,000 to 300,000 depending on your estimate of the rise.
Bottom line: there is a very large likelihood that actual job figures will fall short of the Fed's projection. This will set the stage for yet another bond rally some time later this year.
Those who believe this are already sniffing around for oversold groups. There's no shortage of these. You sure don't see an improving global economy. China continues to put up weak numbers, Europe is still mired in recession, and the strengthening dollar is hurting emerging markets.
For that reason, I'm waiting for a series of big calls to buy emerging markets: the iShares Emerging Markets Index is down 11 percent since the beginning of May.
1) Several traders expressed puzzlement that the CBOE Volatility Index, generally considered a measure of fear, barely moved yesterday, which suggests nobody is substantially short.
Why? Volatility traders tell me that there has been a lot of de-leveraging of risk over the last few weeks (unwind of the dollar/yen trade, long japan equities, emerging markets, etc). With fewer risk positions to protect, there is less demand for protection.
That, of course, could change — particularly if we get a string of days where the S&P moves 2 percent or more.
2) Tomorrow is a quadruple witching day (i.e. the quarterly expiration of stock and index options, as well as stock and index futures). However, its been relegated to a non-event, unlike in years past when it used to be a big deal featuring considerable volatility in the days before.
Now, however, there are so many series listed —regulars, weeklies, quarterlies — that quarterly expiration events just don't bring the same thunder they used to.
—By CNBC's Bob Pisani