Quick take on today's action

Let’s take a quick look at the recent market action . Overall, the as I am writing this on Friday, midday, the indexes are holding up OK. Although some technical damage was done as we broke below 1040, we are holding the 50 day moving average. Given a plethora of excuses to take profits, including bad economic headlines and obsession with October's reputation for market weakness...the markets seems to be taking it all in stride. Even the morning choppy trading, right after the jobless numbers came out, seemed pretty organized and panic-free. The breadth seems pretty narrow. If we close this week in a positive territory, give the dip buyers yet another victory to celebrate.

Although the market averages appear to stabilize, be careful…watch for signs of rotation out of cyclicals into defensives. This rotation could kill your portfolio, even with only a mild pullback in the indexes. This is an important point for a casual market observer, as averages often obscure this little, ugly reality.