A quick glance at most of the headlines over the weekend and the primary focus seemed to be either calling a near term top in domestic equity indices or a focus on the Greek debt situation. Why is anyone even paying attention to what is going on over there? Until the ISDA declares a default where the underlying Credit Default Swaps (CDS) are triggered, it is all just noise.

In May of 2010, immediately following the flash crash many investors started to become bearish (nervous) regarding their position in gold and equities. Once the general public became aware that the stock market could fall 10% in a matter of minutes, investors became very cautious. Suddenly protecting their capital and current positions was at the forefront of their investment process.

Last weeks crude oil spike created some exciting trading and so far 2011 has been interesting to say the least. Stocks and commodities have been jumping around with high volatility generating mixed trading signals. This choppy price action typically indicates trends are in their late stages.

On Wednesday the equities market poured out a sea of red candles. Leaving most traders and investors feeling that most all of their recent gains had disappeared in one short session. And we have warned repeatedly that strong selling volume sessions like this is typically an early warning that distribution selling is starting to enter the market.