Last week, I listed a rather remarkable list of divergences and non-confirmations in the stock market, each one signaling that caution needed to be exercised. The market promptly responded by thumbing its nose at the divergences and rallying to a four-year high - reminding us yet again of legendary analyst Stan Berge's oft-stated comment that as far as the stock market is concerned, "We are dealing with probabilities - not certainties."

The warning flags are still flying, but given the market's response to them last week we must now wait for it to tell us that it's responding to them. This notification will come via three things (probably in this order):

1) Two consecutive closes below the short-term trend-defining 13-day moving
average, which is currently 1413 and rising four points a day.

2) A close below the recent series of short-term lows in the 1395-1396 area.

3) A 90% downside day.

David Fuller's view I think it is important to know what pros such as Walter Deemer are monitoring. You could recreate his 13-day MA in the Chart Library; I mentioned yesterday that a close beneath 1390 would break the rising lows, and a 90% downside day would certainly create a downward dynamic on the chart. Until such deterioration becomes evident, I will still give the upside the benefit of the doubt, while also repeating that a somewhat larger reaction than we have seen since early-June, occurring between now and mid-October, would not be surprising. Meanwhile, the S&P 500 is still climbing the proverbial 'wall of worry.'