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Market Preview: Let's Get Choppy

NEW YORK ( TheStreet) -- Just when it was looking like a weak third-quarter earnings season had the potential to be a non-issue for stocks, Google's (GOOG) surprise (in more ways than one) miss comes along and spoils the party.

The equity market doesn't like to be caught off-guard as Thursday's market reaction attests. Expectations for the quarter are low but that's been gradually factored into perceptions, creating less risk when the actual numbers hit the tape. Individual stocks may get whacked or lauded but the broad market is supposed to, in general, take such basic company news as an earnings report in stride.

Google, though, disrupted all that on Thursday with its errant, awful report, sending all three major equity indices lower.

It's a good reminder. These last few months of the year have choppy written all over them. Last week saw one pullback after another. This week's been the opposite and there's hasn't been a strong catalyst for going either way. The waiting game over in Europe has been an influence as well with traders wondering when Spain will ask for the aid that everyone else is convinced it needs.

That's why the outcome of the summit of European Union leaders in Brussels Thursday and Friday is looming large tomorrow. If this confab yields more nothing and earnings continue to be hit-and-miss, nagging doubts about stocks at these levels will only increase. One datapoint showing growing bearishness arrived Thursday night in the form of the American Association of Individual Investors's weekly sentiment survey.

Those identifying themselves as bearish, defined by what direction they expect the stock market to head in over the six months, swelled 5.7% percentage points to 44.5%, the highest reading since 45.7% in the week ended June 7.

The bull camp clocked in at 28.7%, down 1.9 percentage points, while those feeling neutral came in at 26.8%, down 3.8 percentage points. The AAII polls its roughly 150,000 members each week but doesn't disclose exactly how many participate in the survey.

Then again, traditional market wisdom says this is a contrarian indicator, that it's bullish for stocks when the retail investor gets overly bearish. So maybe stocks are getting ready to take off. The action in the bond market is certainly pointing that way. That's why trading could get extremely choppy from here. The story changes everyday. There are still a lot of unknowns out there -- the presidential election, Spain's fate, the resolution (or not) of the fiscal cliff -- factors that are difficult to invest ahead of because nothing will happen until it happens. And what actually happens is all that matters.
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