The double dip drum has been beating once again given the recent pullback in the markets.  While any pullback is worth monitoring, it is instructive to consider that corrections are actually quite commonplace.  In fact, we’ve had several 5% plus peak to trough corrections since the recovery began in March!  Did you even notice?  

Here’s my chicken scratch math:  

During June:  The S&P 500 “corrects” from 948 to 870, an 8% decline.
During August:  The S&P 500 “corrects” from 1035 to 990, a 4 decline.
During September:  The S&P 500 “corrects” from 1070 to 1020, a 5% decline.
During October: The S&P 500 “corrects” so far from 1100 to 1040, a 5% decline.

Please keep in mind that these are intra month corrections rather than the declines the market posted for each of the months in question.  Corrections are commonplace during economic recoveries, and as the data suggests, each correction has been followed by higher subsequent highs.  Alot of money is still on the sidelines and these corrections have provided opportunities to buy rather than sell.  I believe the pattern will hold. 

Of the earnings I follow, results have generally been ahead of expectations on the bottom line and inline on the top line.  Stock prices, however, have often come under pressure on the results, even when guidance has been increased, at least on the initial report.  Fast money and whisper numbers may be to blame for the fast trading reactions, but with fundamentals improving rather than deteriorating, the upward bias should remain intact.  

Q3 GDP just came in at up 3.5%, the fastest rate since 2007.  Additionally, continuing claims came down, a positive sign and new unemployment claims came in at the low 500’s.  Admittedly, these releases are all backward looking, but should set the tone for a basing process and an end to October’s mini correction.

Once the earnings deluge is over, I hope to provide some additional insights, but for now, I’m knee deep in the earnings data and conference call transcripts.