Volume yesterday was slightly on the heavy side, but it's not the selling I'm concerned with, it's the buying. Or the lack of it.
Is "buy the dip" dead?
With the exception of one or two days, there has been precious little buying interest since the three-day drop in the markets from Aug. 21 to 25.
And why should there be? The markets already have had to deal with the uncertainty of not knowing when, if ever, the Fed is going to raise interest rates.
What bulls need now is some evidence that "buy the dip" does not turn into "sell any rally." Two things are necessary to avoid that.
1) Some evidence the global economy is not falling apart, starting with better data on China, which we did not get overnight. China's Flash Manufacturing PMI came in at 47.0, below expectations of 47.5, its seventh straight month of contraction (below 50) and the lowest print since March 2009.
Read More China flash PMI falls to a 6-1/2-year low in September
Every component was weaker, including new orders and employment.
That's not helpful.
The European numbers were a bit below expectations but at least showed modest expansion. Germany came in at 52.5, while France's reading was 50.4. Markit, which publishes the Flash Eurozone PMI, noted "steady growth" in the eurozone economy.
"Moreover, faster growth of new work and backlogs of orders point to continued expansion in coming months," Markit said.
That's a bit more helpful. Europe has been higher most of the morning.
Read MoreEuropean stocks rise despite China fears
Mario Draghi, in a press conference, said the ECB was closely monitoring signs of financial instability, but has not seen any yet.
2) Better earnings commentary. We are going into corporate earnings season. We already know that Materials and Energy are going to have an ugly time of it. Energy, for example, is expected to be down 65 percent, while materials are expected to sink 12.5 percent.
Third-quarter earnings overall are expected to be down 4.5 percent, and analyst see revenues down 3.3 percent. That is getting worse, rather than better, a fairly typical pattern. If the historic pattern emerges, earnings should move up and approach 0 percent growth.
Revenues are another matter. They have not been improving, and the complaints are getting louder.
Read More Forget China. Focus on earnings, holiday sales: Stock picker
We are now trending for a third straight quarter of revenue declines, which has not happened since 2009, and we could have a clean sweep, with all four quarters down in 2015.
Revenue recession (S&P 500 revenues, source: Factset)
- Q1: down 2.9 percent
- Q2: down 3.4 percent
- Q3 (est.): down 3.3 percent
- Q4 (est.): down 1.4 percent
This is why most traders do not believe that just coming in at 0 percent EPS growth will be enough to sustain prices. The revenue declines have now become a major issue, and without some improvement there, it's going to be tough justifying prices of 16 or 17 times earnings.