There are a few overused phrases for describing the equity markets' strength these days: "Low energy costs are a tailwind." "The U.S. is the best house on a bad block." "Where else are you going to put your money?" "Corporate balance sheets are in better shape than ever before." One by one we are poking holes in this supposedly unbreakable bull market. First, the takeaway from Caterpillar 's results are that low energy costs are crimping profits in bellwethers' energy-related businesses. Next, the best house is starting to show the effects of having weak neighbors. Demand is declining across the manufacturing complex, according to earnings results. As far as balance sheets being strong, many investors are wondering if that's the case, why has the market been on a roller coaster every trading day of 2015. And many believe with the S & P trading at a price-earnings ratio of around 17 times that perhaps sitting this one out in cash is a better option. Read More Bull or bear market? This week will tell When you see companies from Caterpillar to Procter & Gamble to Microsoft trade lower for a variety of reasons, it makes everyone feel less than bear-proof in their portfolios. Single stock bullish stories like Yahoo and Boeing will exist of course, but the far-reaching negative effects of the energy complex getting destroyed and the higher dollar are too large in scale for this market to overcome with a few limited bullish stories. The Fed seems to be out of gas in creating a catalyst to the upside and the best it can do to prop the market up is hold back on disclosing its timeline for rate increases. We've been playing around with the same 100 handles in the S & P 500 cash, and while it gives intraday traders great movement it also breeds complacency among longer-term investors. We have all lost sight of the very real possibility that markets can sell off by more than 10 percent. Read More Trading ECB buying bombshell—1 week later There is no guarantee that the S & P goes up every year, and yet analysts throw their darts at a board and forecast positive returns year after year. The problem is the thing that usually takes the most out of the market isn't usually seen until its done great damage. This year, FX seems to be the grim reaper for investors. If you look at the long-term chart of the dollar index, it's obvious it has a lot more room to appreciate and take profits down further. King dollar can conquer the market longer than we all think. Steven Grasso is the director of institutional sales at Stuart Frankel. Follow him on Twitter @grassosteve . D isclosure : Long several U.S. large cap stocks.
