We are mere points away from 1,300 on the S&P 500 Index. That is a drop of over 7% in the first 17 days of May. Don’t be surprised if you see a spike in the averages in the next few days, but don’t get too excited.

Friday’s unemployment rate was a real downer for the markets. Although the unemployment rate itself dropped from 8.2% to 8.1%, that number was deceiving. The markets immediately saw through the headline number. The resultant decline was hefty.

Good news is good news but bad news is even better news for the stock markets. If you doubt that, just look at recent events and how investors have reacted.

Doubts are growing. Economic data is beginning to disappoint. Investors are taking profits and beginning to sell their best holdings. Yet, earnings are coming in better than expected. What’s an investor to do?

As we enter the second quarter, this first week is a taste of things to come. After months of enjoying a straight-up stock market, we are getting back to the new normal, so strap on your seat belts.

 The release of the Federal Reserve’s FOMC meeting notes on Tuesday was responsible for the initial sell-off in the markets this week. Then a Spanish bond auction on Wednesday was received poorly by bond investors. That spooked the U.S. stock market for a second day in a row. Things have snowballed from there.

It was a quarter to write home about. All three indexes made substantial gains but the S&P 500 Index had a great quarter and its best start of the year since 1998. Will it continue?

Questions concerning China and its economic future kept the market’s exuberance in check this week. Given that China is key to most global growth forecasts, any hint of a slowing of the Chinese economic engine is taken seriously.  This week we received a bit of bad news.

U.S. Treasury bonds and the price of gold and silver have plummeted this week. Aside from the losses they have suffered, both securities represent what are called “risk-off” trades. The proceeds of those sales are being invested in the “risk-on” stock market.