In the past week, the Russell 2000 registered a more than 10 percent decline from its high, putting it in correction territory, much deeper than other indices. Analysts have said that divergence was a concern, and it also spread this past week to the mid-cap sector.
"The market got overbought. We started seeing divergences" that were unresolved, said Doll. "We got a head of steam in the Alibaba IPO. The market faded that day. That was the high…My guess is we have more short term turmoil to go, more probing to the downside. New highs would surprise me more than anything."
The market has indeed come down since peaking on Sept. 19, the day Alibaba started traded at the biggest IPO ever. The S&P 500, as of Friday afternoon, was down more than 2.5 percent since then, though Alibaba is about $20 above its $68 offering price.
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Of all the worries on his list, Doll said the big one is Europe and whether the European Central Bank succeeds in lifting the economy and fending off deflation.
Rick Rieder, co-head of Americas fixed-income at BlackRock, agrees that volatility in the U.S. markets is imported from overseas and he points to concerns about growth in China, Japan and Europe.
"Frankly, I think U.S. growth may ebb and flow, but it will be around a decent set of numbers," he said, noting the U.S. is moving slowly toward rate normalization as those other regions require central bank and fiscal intervention.
Rieder said for this reason, the dollar should continue to gain. The dollar index was up more than 1 percent for the week, and it's up more than 8 percent year-to-date.
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Oil fell more than 4 percent in the past week, and the stronger dollar was one factor as was supply. WTI crude fell below $90, and was at a 17-month low. Brent, the international benchmark, was off even more than WTI, losing 5 percent and it was trading at a 27-month low of $92 a barrel, a near 20 percent decline from its high.
Rieder said the U.S. is benefiting from cheaper oil prices, not only because of the impact on consumers but the fact the U.S. energy boom has helped drive cheaper energy prices across the entire economy. In the most recent week, the government reports that U.S. oil production rose to 8.8 million barrels a day, a million barrels higher than last year.
"I don't think people really appreciate the multiplier effect energy has through the system," he said, adding it passes through to the chemical industry and transportation.
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"You're creating a tail wind to economic growth without inflation. What drove volatility in inflation in the last decade was incredible volatility in oil," said Rieder. He said it's now stable even though events in the Middle East would have driven prices higher in the past.
Doll said cheaper oil could translate to better holiday sales. "Among the reasons the economy is okay, and earnings are okay is the decline in oil prices. Consumers are spending as a percentage of income , less money on food and energy than they have in a couple of years," said Doll.
November election positive
"I just think the market continues to consolidate. The bull market I'm convinced, is not over even though we could have a few months of sloppiness. Seasonally, we'll get into a strong period close to the election," he said. Doll said the market has not priced in the potential for a Republican victory in the Senate, and if there were one it would be viewed as a positive. But even still, the market traditionally performs well in midterm election years, both at the end of the year and into the first quarter of the next year.
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"It's the 16th mid-cycle election since 1950. Six months later the market has always been up and the average gain is 16 percent, and 100 percent of the time it's been up," he said. For now, the market "needs to see improvement in breadth. The internals of the market need to get healthier. There could be a period of sideways action…whether it's November, December, January or February, I'd be shocked if we didn't see new highs. Something would have to go haywire in the economy, and I just don't see that."
Traders are also watching the general elections in Brazil Sunday. The latest poll Friday showed President Dilma Rousseff edging out the two main challengers. A runoff of the top two candidates would follow if no candidate gets half the vote. Markets have favored candidates other than Rousseff, seen as less likely to implement reforms to improve economic growth.