Stocks got hammered again on Tuesday, more than reversing Monday's bounce. The S&P 500 (^GSPC) and Dow (^DJI) both dropped about 1%. The Dow is now just over 4% off its record high from July 16th.

What's ailing the market? A bunch of things. Let's tick through them here. You're going to be hearing about this stuff all day so let's get it out of the way. We'll start with deals blowing up. This morning Walgreens (WAG) announced a completion of an acquisition for a foreign partner but it's not going to use the so-called inversion loophole and become a foreign domiciled corporation. Behind the scenes the U.S. Treasury, spurred on by the Obama administration, has vowed to make life complicated for U.S. corporations looking to move abroad. Inversions are dead.

Other M&A-based bids are falling apart as well. T-Mobile (TMUS), Sprint (S) and Time Warner (TWX) shares are all getting destroyed today after potential corporate marriages that had nothing to do with inversion collapsed last night. Everyone's a long-term investor until they wake up and see their portfolio down 10% because some corporate raider got cold feet. Stocks take the escalator up go lower via the elevator shaft. That creates selling pressure.

How about the fundamentals? Earnings have been good. Three quarters of companies that have reported so far have beat on EPS and two thirds have been better than expected on revenues. That's enough to question the Fed's aggressive stimulus but not good enough to make the market cheap. That's a second blow to stocks on the margin.

For my money the stock market's biggest problem is mental. The marginal buyers or sellers of stocks aren't operating on math but emotion. Buying stocks is an act of optimism. Holding through a sell-off is a function of conviction. At the moment Wall Street has neither. A Wall Street Journal / NBC poll released this morning showed 76% of Americans lack confidence that their kids will be better off than they are. 71% of us say the U.S. is headed in the wrong direction. As a collection of sprinkles on the sundae of misery we've got Putin escalating, the Middle East falling apart, and a freaking potential Ebola outbreak. We're surly, tired, and just a little scared in general. That's not bullish.

That's the bad news. I'm not trying to scare you. I'm telling you what is. None of these factors is fatal to your portfolio but living in denial is. I still love the stock market. I'm still long stocks but as mentioned at this very desk I've trimmed some exposure. It's not advice but a feeling that we're a little less than halfway through this shake-out. The S&P 500 has support at about 1800. That would be 10% from the highs. I'd LOVE to buy stocks there. Until then I'm inclined to wait. That's not advice but it's my strategy. Things aren't so bad but we're past due for a reminder of what risk looks like. Here it is.

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