Like drunken sailors on shore leave, markets fell for a second straight week. Friday in particular saw the Dow drop nearly 2 percent. It now looks oversold.
Interesting to watch markets rage over bond and currency declines in emerging markets, particularly Argentina, after major credit crises in major European markets like Italy and Spain failed to derail them these last three years.
Meanwhile, the world's richest and most powerful have gathered in Davos. Private planes. Limos. Skiing. Full-body fur coats. Private chefs. And $26,000 bottles of Cristal. All, so that the world's top 0.00000000001% can discuss a more effective means by which your life might be run. For Jon Stewart's ever-humorous take on this hubris festival, click here.

The Good
Q4 earnings season gathered steam with 25 percent of S&P 500 companies having reported thus far. The EPS growth rate is 6.4 percent. This is below expectations, but above the 3.8 percent four-quarter trailing average. 68 percent of companies have beat EPS expectations.
The Bad
Fears of a China slowdown, a Turkish political drama and an Argentinean currency crisis have sent emerging market stocks down nine percent year to date. While global investors are largely underweight EM stocks, fears of a contagion (what is this, a zombie movie?) rattled investors.
Truth is, as the Fed continues its tapering efforts, the Law of Unintended Consequences will likely bring continuing misery to EM markets. Which may worsen with political and social unrest.
Domestically, Treasury Secretary Lew warned Congressional leaders that the debt ceiling need by raised by late February, as the Treasury's extraordinary measure last only till early March. Pundits don't foresee a repeat of the August 2011 or October 2013 dramas, but what the hell do they know. The headline risk alone could shake markets and dampen confidence.
The Ugly
A month ago, nobody was sweating anything. Last week, the S&P 500 Volatility Index (VIX) soared to its highest levels since last October's government shutdown. The VIX can go higher. And markets can go lower. The fear factor alone, driven by an omnipresent, never-off 24/7/365 news media can quickly scare uncommitted investors into a stampeding herd of fear. And last week saw the market fall beneath its 50-day moving average for the first time since early October. Leaving investors to ponder: is this the beginning of a bearish trend?
The Bottom Line
Research indicates that typically, following extended periods above the 50-day moving average, a move below that line has not been the start of an ominous downtrend.
Bespoke Investment Group reports that, dating back to 1928, there have been 62 such occurrences where the market traded above the 50-day MA for three months or more and then dipped beneath. On average, the next three months has resulted in the S&P 500's rising 3.2 percent. Further, the market has, over the last three decades, been positive 83 percent of the time three months after these dips.
Accordingly, Bespoke's data supports the idea that last week's route does not portend the start of the next bear market. That's not to say it couldn't happen.
We've been waiting for a long-overdue 10-percent correction. The best way to consider the current pullback is to resign oneself to the idea that this is that. Should markets drop by 10%, or thereabouts, you have already mentally accepted its inevitability. And will have time to prepare a list of positions you care to buy at that time. If it doesn't happen? Everyone likes positive surprises.
Weekly Results
Major markets finished sharply lower last week. The DJIA fell 3.52%, the S&P 500 dropped 2.63%, and the Nasdaq declined 1.65%. Small cap stocks lost 2.08%. And the 10-year Treasury bond yield fell 10 basis points to 2.72%. Gold rose $15.35 per ounce, or 1.57%.