A day does not make a trend, but......

....it sure gives you a reason to critically look at things. The markets first stop on the downside will be the 200 EMA, which will be smack dab in the middle of the 50-61.8% fib retracement of the August low to October high by the time it gets there. I have the 50% move at 13,358 and 61.8% at 13159. Switching to the weekly chart, the up trend line is at 13,365 - just on top of the 50% retracement. Last time we hit the weekly uptrend, we significantly pierced it before closing just on top of it.

Short term, I expect a move to, and below, the weekly up trend to the 200 EMA on the daily chart. I will be watching for the piercing of the weekly uptrend and "kiss" of the 200 daily EMA within one day. I will go long at this point for a short term move up. If we get a bounce out of the gate on Monday, I will wait to go short the YM for a move to the daily 200 EMA if we get 3 successive up days or a re-test of the 34 EMA.

We all know that overbought conditions can stay overbought for some time; however, (as can be seen on the chart above) the move on Friday cracked the uptrend line on the daily chart. Thus, I will look for a trend down to correct the monthly chart.

A full blown monthly chart correction is between the 11684 and 12164 level. A move to the 12164 level is a 14% correction from the highs. Will we get there?

What does this mean for currently held long equity positions? Not much. The monthly trend indicator on the DOW is still long even though the monthly chart is overbought. So, I can expect pullbacks, yes, but not trend reversals. Another words, I am not looking for exit positions of favored holdings. There are some crappy holdings that I have that recently experienced trend signal reversals. I will be burning these stocks next week not waiting for the 25% draw down of my initial position. My other favorite holdings will be treated as follows:

1. Switch of daily trend indicator to flat or negative - sell 1/3rd of holding.

2. Switch of weekly trend indicator to flat or negative - sell another 1/3rd of holding.

3. Switch of monthly trend indicator to flat or negative - sell final 1/3rd of holding.

My trend indicators are much quicker than a moving average cross over, so I will not be waiting for major moves to get out of these positions. This serves to preserve capital. The comeback response to this is "well it may get you out too soon." If my daily trend indicator turns back to bullish if price is above the daily 200 EMA, I would put on a partial position. I never forget about my favorite stocks. Always watching them.