And that's normally how tops are put in for the short-term. It doesn't mean the market will get killed from here. It shouldn't, but it should drift lower for a while with plenty of up days. The key here for the day is the fact that we had a strong reversal off the gap-up tops, closing well below the opening prints. Based on some negative divergences around just about everywhere, it does mean we should go lower, still, in time before finding solid footing for more upside action. When markets back test off the top you want to see how that back test gets handled. We saw near equal highs today, but with those nasty oscillators abounding, the back test failed as it should have.

When back tests fail, it usually, but not always, means we will slide somewhat lower in the days and weeks ahead. It tells you there's exhaustion taking place after the initial move up. The back test just doesn't have the energy any longer to carry the market up significantly for a while to come. This type of stick is usually the best friend of the bears short-term. While there are never any guarantee's in this crazy game, this type of candle printed across all major-index charts, gives the bears some confidence that we'll try lower short-term. So today was not the best day for the bulls, but it's not a death knell bigger picture either. It just means upside action will be more difficult for a while to come. The bull market is still fine bigger picture for now.

One of the areas that saw the biggest and most powerful reversal today were those financial stocks, which have been leading for quite some time now. Strong negative divergences hit them at their tops today with some really big reversals across the entire spectrum of stocks. Goldman Sachs Group, Inc. (GS), JPMorgan Chase & Co. (JPM), Direxion Daily Financial Bull 3X Shares (FAS), and many others, represent that large reversal down on some decent volume near the recent highs. Again, it doesn't mean death bigger picture, but when the biggest leaders of the recent run up start failing, you need to take notice and recognize the easy times are gone for the short-term. The rest of the market reversed as well, but it's extremely important to see where the leading stocks were after a strong reversal day. Many of the biggest down swings, after the morning gap up, came in the world of financials. That's very relevant for now. Transports reversed as well as did others, but for the day, the financial world spoke the biggest volume about things in terms of downward reversals for the bearish case short-term only.

The VIX, or the measurement of fear from traders, showed a huge spike today, the type of spike rarely seen in markets. They occur only when traders get blindsided. They're complacent about the market and unprepared for anything powerful. Once the market snaps, they run for shelter. The move up in the VIX is extremely good for the market bigger picture. You want pessimism to become part of the landscape. Without it the market runs out of bullish fuel. This type of short-term fear can help reset the oscillators fairly quickly. If we don't get big pushes up in fear, the markets can turn sour in a way you don't want to see if you're a bull. A good dose of fear will help the bigger picture. Good to see the traders get hit when they didn't expect it. I hope it runs higher overall for a few more days. The higher the VIX the higher the fear.

Support is our concern now, not resistance. We won't be blasting up towards resistance for a while longer, although there will be up days. 1470, or thereabouts, is very powerful support for the bulls. It wouldn't be a big shock if we broke through that a bit in order to create more fear and shake out the weaker bulls. We can bounce back at any time a little bit, so always recognize the market won't go straight down. I also don't expect this pullback to be that large. What may scare me for the future is how the oscillators react to the next push higher once this correction ends. If it's weak, and we make new highs, the market will likely get very hard. All that will be over time. For now, we keep it light as the correction continues a bit further.

Peace,

Jack

Jack Steiman is author of SwingTradeOnline.com ( www.swingtradeonline.com ). Former columnist for TheStreet.com, Jack is renowned for calling major shifts in the market, including the market bottom in mid-2002 and the market top in October 2007.

Mr. Steiman's commentaries and index analysis represent his own opinions and should not be relied upon for purposes of effecting securities transactions or other investing strategies, nor should they be construed as an offer or solicitation of an offer to sell or buy any security. You should not interpret Mr. Steiman's opinions as constituting investment advice. Trades mentioned on the site are hypothetical, not actual, positions.

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