Primed For A Correction

As someone who added to short positions after the 4pm close last Friday, I was as surprised as anyone to see the futures in the red this morning.

Watching them climb steadily during the Asian session last night (ugh), I went to bed trying to remind myself to stick to my plan: to accumulate even more up to a test of 1230.71 on the S&P cash.

Last night, I must admit, the plan seemed crazy. This morning it looks a lot more sober. The futures rolled over from 1230.75 and dropped in an impulsive thrust to 1215.

I added to shorts Friday based on pattern alone. If my count is correct, 1224.61 should not be exceeded by much. In fact, after such a reversal, I'd be surprised to see it exceeded at all.

This is a market primed for a correction. And once again, Forex trumps equity. While Asian equity markets were gunning higher, the euro was starting to roll over, along with the Aussie.

This morning, the dollar is higher, and is shaking things up in FX-land. The aforementioned euro and Aussie are still red, and joining them are the Pound, the Franc, the Kiwi, and the Loonie. Try to watch all the moving parts for tells.

Another tell was last Friday. As the equity markets hit new highs, NYSE volume contracted to the lowest since July 26. Yet another reason why last night's reversal should not be taken lightly.

Levels: 1190.58 should be the first to go if this reversal is for real. Then 1167 will attract my interest. My eventual target is 1132 in the next few days.

Should the market gather itself and decide to head higher, I will probably dump my latest short and reassess. 1230 would be the immediate target. 1250-1260 could be as well, but I doubt it.