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Stocks shrugged off weakness in China during the early portion of trading, but ultimately ended lower as volume was light and breadth was particularly weak.  Continued strong earnings from Apple and several other firms was unable to keep the market above water.  Breadth was negative at 2:1 and ultimately pulled the market lower in a broad sell-off that took the S&P lower by 0.45%.  The market is now down 2% on the year.

CNBC was quick to blame the sell-off on comments from Robert Prechter that the market has entered the next phase of the bear market, but the sell-off began well before that.  In fact, the sell-off appears to be due to continuing concerns over the Volcker Rule and Obama’s war on Wall Street.  There is still a great amount of uncertainty regarding the new regulations and Obama is likely to talk very tough in his State of the Union address tomorrow night.  Investors are not eager to get long in front of these events.

Despite the declines, the VIX followed the market lower as option traders actually added to risky positions.  Financials were particularly weak on the day and finished almost 2% lower.  Oil prices were down almost 1% as the dollar rallied versus most currencies.   All in all, the action remains negative and I continue to believe the uncertainties in the market could continue to weigh on stocks.    There is no need to get overly aggressive on the long side here.