You've got to love the stock market game. Just about the time you think you've got it figured out, boom - it changes. Or maybe it doesn't, who knows. Frankly, there are times when it is very hard to tell why Ms. Market is doing what she is doing. But since that's the stated objective or our time together each day, let's give it a shot, shall we?

The S&P 500 is now off 5.76 percent from its recent high water mark. Believe it or not, that's the good news. The Dow is down 7.26 percent. The S&P midcaps are off 6.9 percent and the Russell 2000 smallcaps have now fallen 7.3 percent from their recent highs. Looking across the pond, the EAFE index has dropped 7.3 percent and the much maligned emerging markets now sport a decline in the double digits at 11.21 percent this year alone.

Given the numbers on the pullback, it will suffice to say that we've got a correction on our hands. As such, there are really only two questions that matter. First and foremost there is, why are stocks going down? And then there is the ever popular question of, how low can they go?

Since any honest player in this game must plead ignorance on the latter issue (or merely admit to guessing early and often), it is probably a good idea to focus on the first question here today - you can probably find the opinions and the guessing lots of other places.

It's The Economy, Stupid

For the past week or so, the idea has been that stocks have been falling on fears of what another emerging markets crisis would mean to both the major economies and equity markets of the world. Thus, we've spent an inordinate amount of time doing inter-market analysis to try and determine whether or not there was actually a crisis at hand.

The thinking has been that if there isn't really a crisis, then the current pullback will likely wind up in the "garden variety" category and investors could buy the darn dip with confidence. However, if there were signs that the "crisis trade" was heating up, it would probably pay to move to the sidelines for a while as things tend to get nasty whenever traders and their computers latch onto a crisis theme.

However, Monday's 326 point dance to the downside didn't appear to be driven by worries about the emerging markets. No, the theme to yesterday's shellacking was as old as the hills: slowing growth.

Blame It On the Weather?

While a great many analysts prefer to chalk up the recent spate of weaker-than expected data to the nasty winter weather, if one looks objectively at the string of reports, a pattern emerges.

First there was the December jobs report, which missed badly. Speaking of December, it is now widely accepted that the holiday shopping season was a bit of a dud. Then there has been the data out of China, which seems to get weaker each month. Next up, there was yesterday's ISM Manufacturing report which missed badly and as the WSJ opined "fell out of bed" by dropping to an eight-month low. Oh, and the sales numbers from the nation's auto manufacturers weren't exactly inspiring.

So let's see here. China is slowing. The U.S. consumer is muddling through. The rest of the economic data has been on the punk side. In addition, the Federal Reserve has decided that it's time to start removing the punch bowl from the party. And to some analysts, this represents a dangerous combination.

And Now A Word From the Bear Camp

So, what do traders do with this string of inputs? Sell, that's what. Now toss in a breach of important support on the charts, the mother of all short squeezes in the bond market, a soaring Yen, and a spike in the VIX, and you've got the makings for a bad day at the office for those in the business of trying to manage the stock market (unless, of course, you had already taken defensive measures, which means that the latest declines haven't hurt so bad).

Soc Gen's Kit Juckes summed it up nicely in a note. Mr. Juckes wrote, "The combination of weakening Chinese data, and the gradual turn in Fed policy, will continue to fuel negative sentiment. Flows of money into EM since 2010 have been huge. The path back towards any kind of neutral fed policy stretches ahead of us and the Chinese economic slowdown is no flash in the pan. So the drivers of the current turmoil aren’t going to go anywhere and any respite is likely to be temporary.”

The Bears Are Back

So there you have it; according to their spokesman, the bears have all the bases covered at the present time. Those seeing the glass as half empty win if the outflows in the emerging markets continue and also if the economic data continues to underwhelm. Super.

Given that our furry friends had a very rough go of it last year and haven't had much of anything really to cheer about since the U.S. debt downgrade in late-2011, it isn't surprising to see traders of all shapes and sizes jumping on the bandwagon at this time.

It would appear then that is once again time to buckle up because the ride is getting very bumpy again. The real question now is if investors will need to don the helmet and/or crawl under their desks any time soon. Time will tell. But to be sure, THIS type of market is why we believe in a disciplined approach to managing risk in the stock market. Such an approach isn't for everyone and it doesn't always go smoothly, but it does help us sleep at night when things get nasty.

Positions in stocks mentioned: none

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