For the moment, here's where we stand:
First, Japan and U.S. seem stretched. For the moment, most of the commentary focuses on the thin trading and very few traders are willing to make sweeping comments about an imminent turning point in the market based on this week's modest declines and very light volume (we are on track for the lightest volume week for the S&P 500 since August, 2006, according to CNBC's Quantitative and Data Services team). However, a small group of traders have told me they aren't comfortable enough with the economy and earnings to take stocks higher.
Second, Europe is in the sweet spot: It's cheaper than the U.S., traders are underexposed, and it's been outperforming recently.
Third, China is improving. Almost across the board the economic numbers have been better recently: manufacturing PMI, imports and exports, industrial production, bank lending and even electricity production—the favorite of China skeptics.
We will be able to advance the story considerably next week when a large amount of global economic data will be released:
- The U.S. will release Retail Sales, Producer Prices, Industrial Production, and Housing Starts. St. Louis Fed President James Bullard, a moderate and voting member of the FOMC, will be speaking Wednesday;
- China will release Retail Sales and Producer Prices;
- Japan will release Industrial Production;
- France, Germany, the Eurozone and Hong Kong will release GDP figures.
—By CNBC's Bob Pisani