On the heels of slightly weak data from China and Japan and England, and a huge jump in the US trade deficit, stock index futures are getting slammed this morning, with S&P 500 futures down almost 18 points, or 1.6%, and Dow Jones Industrial Average futures down 145 points.

The dollar is very strong this morning (except against the Yen), particularly against the Euro where it’s up a full two cents against that currency, adding to the stock market weakness.

And the yield on the 10-year note continues to drop to levels not seen since the market panic at the end of 2008 and early 2009, and not ever seen before that.

It’s interesting to see gold up strongly this morning even with a strong dollar.  It’s a sign of market fear, fear of instability and of not knowing where else to park money for safety.  It’s not a good thing (except if you own a lot of gold.)

Other hard commodities are mostly down, with oil down about $1.25 and copper down about 4 cents.  It’s interesting to see copper still well above $3 even with this fear of a modest slowdown in  China, the consumer of all commodities as the world perceives it.

My hunch is that this fear is overblown and that the market is using the Asian news as an excuse to take profits.  I’ll probably sell some out of the money puts and calls this morning if implied volatility in the options goes up substantially, as it probably will.

I didn’t quite understand the sharp positive reaction to the Federal Reserve’s announcement yesterday.  It seemed like everyone focused on their choosing a modest policy route, but didn’t focus on the fact that the so-called “recovery” seems to be slowing down – as I’ve long said it would because of the Obama Administration’s goals for higher taxes and more burdensome regulation and a general tenor of uncertainty.

That said, with almost everyone I know still quite negative on the market, I think the downside is rather limited.  I usually try to look for the market to do what would surprise the most people and I think that’s still an upward move…but even I would be surprised if it happened today.