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A Dangerous Point in the Market

This is a dangerous point in the market. The shorts got blown out of the market yesterday in what several traders called a "sucker rally" in the last hour of trading. What happened?

The facts are that the Dow Jones Industrial Average rallied 90 points on ... nothing. A big buy program. Oh, I know, Apple led the way and ended up 4 percent, and I duly cited that, but really. It was a strange rally, and it had the effect of once again scaring the shorts out of the market.

Except today we have another day with poor earnings commentary, and a weak open in Europe. But with shorts mostly out, it means short covering will not be as available as it would be.

That makes it a dangerous market. The poor earnings commentary that hurt technology stocks last week has now spread to the broader markets — to global industrials, materials, and what are referred to as "multi-industry" companies that sell in many different regions of the world and to many different businesses:

1) Illinois Tool Works beat on earnings, but revenue was light,

2) 3M earnings were in-line, but revenue was light, reduced its full-year guidance (to $6.24 to $6.32 a share from $6.35 to $6.50 a share).

3) DuPont missed on bottom line, and missed very big on top line. It also dramatically lowered full-year 2012 guidance to $3.25 to $3.30 a share vs. estimates of $3.93 a share.

4) UPS was in-line, but revenue was light. It narrowed its 2012 earnings per share (EPS) range to $4.55 to $4.65 vs. estimate of $4.56 a share. UPS is sitting at the lowest level of the year.

5) This follows on the heels of South Korea's Posco, the fourth-largest steel maker in the world, which overnight cut is sales forecast for the third time this year.

It wasn't all doom and gloom: Whirlpool was a bright spot. It beat and raised its full-year guidance to $6.90 to $7.10 a share from $6.50 to $7 a share. Overall, North America sales were up 2 percent, Latin America sales (ex-currency translation and Brazilian tax credits) increased 21 percent, and Europe Middle East and Africa saw a sales decrease of 10 percent.

And truck leasing company Ryder beat and raised its full-year EPS forecast.

I'll have more on what I see happening in the big global companies, but here are the obvious trends. The business for these companies is choppy:

1) most are missing revenue forecasts;

2) orders are slowing down, i.e. the "book-to-bill ratio" for many companies is below 1, with many reporting delays in new projects. The concern now is that capital spending for 2013 may be lower than expected; and

3) there's no help from any region — China may be bottoming, but is not helping immediately, Europe is stable but remains weak, and the U.S. has seen some slowing since the prior quarter. (Read More: China's Doldrums Put Pressure on US Exporters.)

With 144 companies reporting, 60 percent are beating earnings estimates. EPS growth is at 0.13 percent, revenue growth is 0.8 percent. Fourth-quarter earnings estimates are at 9 percent (the lowest it has been so far) revenue growth is expected to be 3.2 percent. (Read More: Earnings Cliff Ahead? Profit Outlooks Are 90% Negative.)

—By CNBC's Bob Pisani; Follow Him on Twitter @BobPisani

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  • A CNBC reporter since 1990, Bob Pisani covers Wall Street from the floor of the New York Stock Exchange.

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