Keep your gaurd up

A comment first about today's action....despite the flat close as I was expecting, I saw some bearish signs out there today. That push higher in the morning squeezed out a lot of weak shorts. I saw greed today early on from the option speculators via a very low put/call ratio...it firmed up a bit towards the close but I would still classify it as greedy behavior. In addition, the leading sectors of the market tech and emerging markets continue to show relative weakness which has been going on since about the first week of August. When leading sectors become relativily weak it's often a warning sign of an impending broader market correction. The same sort of behavior occured in early June which eventually led to a 7% correction in the market.

I also noticed for the first time in a long time that there's not much talk about the reversal day today which formed a doji candle in the chart. You might recall how in the past I dismissed any excitement such chart patterns generated deeming them bear traps...this time we may have actually seen a legitamate reversal day.

These comments seem like a flip flop of the bullishness I was expressing over the weekend...well, they are...and better get used to it because I have no loyalty at all to any side of the market or my previous opinions....I have ZERO ego to protect. Mind you, it's still way too early to dicipher much from a single reversal day. I am very curious to see the rydex data tommorow morning to see if rydex traders did a flip flop of their own and bought on today's weakness.

Bottom line: Today's reversal should put you on gaurd for more weakness in the comming days although it's too early to really know for sure if the real correction is going to start immediately, after all, the market was at a new YTD high just this morning. When we had that 2% down day last Monday, I said it was my gut feeling that the real correction would start next week....well here we are now. I told you that these situations are very, very tricky. Don't force it. When in doubt do less or better yet stay out and wait for an edge. That's what I've been doing.