Weak oil, strong dollar dominate market chatter

There are three macro themes that are continuing to play out in 2015: 1) weak euro/strong dollar, 2) lower oil, and 3) low bond yields.

Traders—all of whom know how to jump on the bandwagon and follow a trend—are doing just that.

So they are shorting Europe, with Italy, Spain, France, Germany all down 3 to 5 percent.

They are continuing to short energy, particularly shale stocks, with even the biggest names like Chesapeake, Concho, and Pioneer Natural Resources down 5 to 6 percent.

By the way, the collapse in estimates for energy stocks is truly breathtaking. On Dec. 1, analysts were anticipating earnings in that sector would be down 3.7 percent in 2015 compared to 2014, according to S&P Capital IQ.

Today, those same analysts are expecting energy earnings to be down 21.9 percent.

Wow! I haven't seen a collapse in a sector's profit outlook like that since the financials fell apart in the fourth quarter of 2008.

Unfortunately, there are also knock-on effects as oil remains near its lows. For example, Caterpillar was down 5 percent on a downgrade from JPMorgan because of its exposure to the energy business.

Monday afternoon ISI sounded a similar note, pointing out that strong growth in energy producing states (Texas, North Dakota, Oklahoma, etc.) has also led to growth in the construction business. The reverse is now true, which explains why names like United Rentals (URI), an equipment leasing company, is the weakest stock in the S&P Industrials, down almost 11 percent.

And they are shorting global growth, with many industrial names like Illinois Tool Works, Textron, 3M, and Honeywell all down 2 to 3 percent

When will this end? Traders, after all, are mostly momentum followers. What would change the conversation? Crude stability and stability in the dollar would do it, but U.S. corporate earnings might help, and they will be out in a couple of weeks. I think many companies will be talking about a strong U.S. economy and the benefit of lower oil.

It's obvious that analysts are taking down energy company estimates but analysts seem much slower to quantify the effect of lower oil and natural gas on consumer names and energy-intensive companies. That might change.