Dave  Moenning

On Monday afternoon, I heard an awful lot of talk about the "great action" seen in the major indices. While I initially argued that a drop of 240 Dow (DIA) points could hardly be considered "constructive action" in my book, I knew full well that I was being petty due to the fact that it was the big rebound from the lows that was being referenced. And while I countered with the idea that much of Monday's eye-popping bounce was due to rumors of this and that, the bottom line to pure market technicians was and always will be the action on the chart.

To be sure, I am not a pure technician. No, I'm more like the kiddy version of a technician. While I would never dream of taking a position without consulting a chart and I will admit to spending the vast majority of each day poring over six screens full of squiggly lines and flashing quotes, I prefer the old-school stuff like trendlines, support and resistance, and some almost-fancy moving averages. So, before I hung up the phone with my technical-oriented buddy, I did manage to slip in the idea that if Monday's rumors proved false (again) then the bulls might be in for some trouble.

Then came Tuesday. To put it mildly, the news flow was abysmal and stocks reacted appropriately. Suddenly the "great action" - which, to me at least, was indeed tied to the rumors du jour on Monday - was gone. There was some good news to report in the early going as China's PMI was the best in several months. But after that, things went downhill in a hurry.

So let's review. First, after the bell on Monday, Moody's (MCO), having gotten bored with the easy stuff, decided to up the ante and cut their ratings outlook on Germany (EWG), Netherlands, and Luxembourg (I know, even Luxembourg!). Moody's cited "rising uncertainty regarding the outcome of the euro area debt crisis" and "the increased susceptibility to event risk stemming from the increased likelihood of Greece's exit from the euro area" as reasons to hint that they may soon be downgrading Europe's biggest and baddest economy.

Next came the early morning earnings where DuPont (DD), Altria (MO), and AT&T (T) all followed the current trend of missing revenue estimates. Then came United Parcel (UPS), which hit the trifecta by missing on both the top and bottom lines, cutting their guidance for next quarter, and then talking of uncertainty going forward. Thus, even the most enthusiastic bulls are going to have a hard time arguing that earnings continue to be great.

Dave Moenning

David Moenning is the President and Chief Investment Strategist for Heritage Capital Management, a Chicago based SEC Registered Investment Advisory firm which he founded in 1989. You can follow Dave at .