Anyone awake and scanning their screens before the sun rose on Thursday morning likely had one thought running through their minds, "Here we go again." You see, each and every time the economy and the stock market had gotten something going since the credit crisis ended in early 2009, something came along - usually the perception of a calamity in Europe - to stop the bulls dead in their tracks. In fact, the rallies of 2010, 2011, and 2012 were all halted, sometimes in spectacular fashion, by the never ending debt crisis that was unfolding across the pond.

So, with the Japanese stock market down an eye-popping -7.32%, Europe getting tagged by more than 2%, and the S&P futures down more than 16 points, one could hardly be blamed for thinking that the bad old days had returned and that it was time to take cover. In fact, after seeing the carnage that was occurring overseas, I found myself relieved that our systems were not overly leveraged at the present time and that our exit point was close at hand.

Take a look at the chart below and you'll see what I mean. The 2010 rally was ruined by the first go-round with Greece. The "the economy is better than everyone thought" rally that ended in early 2011 was killed by an expansion of the Europe crisis. Then the combination of Greek drama and stupidity in Washington D.C. annihilated the market in the summer of 2011. And finally, the next "hey, things aren't so bad after all" rally of early 2012 was stopped in its tracks by, oh you get the idea.

S&P 500 - Weekly

One of the important lessons that investors of all colors, shapes, and sizes have learned over the past four years is that gains in the market can be fleeting. One minute the economy is good and stocks are rallying nicely, and the next, well, not so much! And although my thesis for 2013 has been that stocks wouldn't experience a severe correction unless a new crisis emerges, my discipline says that what "is" happening in the market trumps what I think ought to be happening every time. So, given that the market's current rally has become extended and just about everybody, everywhere is looking for a correction, it looked like the annual panic was about to return,

But a funny thing happened on the way to the panic. Yep, that's right; it didn't happen. Sure, stocks opened lower. And the indices actually closed lower. But a drop of 13 points on the DJIA and a loss of -0.29% for the S&P isn't exactly the type of volatility that we saw during the panic-stricken days of 2010, 2011, and 2012.

Yes, it is true that the HSBC Flash PMI numbers out of China were weak. And yes, that is indeed bad for Europe's economy. It is also true that the current selloff in the bond market may be for real this time (Goldman Sachs seems to think so) because if the economy cooperates, the Fed may indeed begin tapering their stimulative efforts.

However, my point on this last trading day before a long holiday weekend is that the type of panic that dominated the markets in the spring/summer of the prior three years wasn't evident yesterday. Heck the VIX only managed to pop up 1.8% on Thursday. Normally, when things get overbought and then reverse, we see the so-called fear index spike higher by 5%, 10% or even 20%. Thus, a rise of 1.8% appears to be a fairly weak effort by the bears.

Can things get worse? Is the panic in Japan over? Will the games that the hedge funds play relative to currencies and equities in Japan continue? Will the holiday weekend mean an increase in volatility today? And will the corrective phase that began on Thursday keep going? My answers are: yes, maybe not, most likely yes, perhaps, and probably. However, given that so far at least there is no evidence of any real panic in the market, we should probably assume that any correction will likely wind up being of the garden variety.

Turning to this morning...

The volatility continued in Japan overnight as markets moved in a 6% range from high to low. At issue seems to be the concern that the country's massive QE campaign may have done enough for now. The volatility in the land of the rising sun seems to have spilled over into both European and U.S. markets. Futures in the U.S. had been trading higher but have since moved lower. Thus, it looks like the volatility of the past two days will be with us again today.

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The opinions and forecasts expressed herein are those of Mr. David Moenning and may not actually come to pass. Mr. Moenning’s opinions and viewpoints regarding the future of the markets should not be construed as recommendations. The analysis and information in this report and on our website is for informational purposes only. No part of the material presented in this report or on our websites is intended as an investment recommendation or investment advice. Neither the information nor any opinion expressed nor any Portfolio constitutes a solicitation to purchase or sell securities or any investment program. The opinions and forecasts expressed are those of the editors of StateoftheMarkets.com and may not actually come to pass. The opinions and viewpoints regarding the future of the markets should not be construed as recommendations of any specific security nor specific investment advice. One should always consult an investment professional before making any investment.