In case you have run out of things to worry about, consider a correction indicator that is flashing red now. The RSI (relative strength indicator) is good about flagging tops and bottoms of reasonably stable price action. As such, it works well on big cap stocks during normal trading phases. It is really not of much use on smaller stocks or violent moves in bigger stocks. I tend to ignore it altogether, because I like small stocks doing violent climbs where it pegs the RSI at overbought and keeps it there all the way up a monster climb. I tend to buy when it says sell. So I take joy in belittling this indicator.
But the RSI is reliable on a really big thing like the S&P 500. In fact, if you study the weekly charts to filter out the daily noise, you find that the weekly RSI going through the overbought 70 level is very good about indicating a market top. This doesn't happen very often - just four times in the last 10 years. And the result was not good each time. But if you add a one month volume view to this indicator on the weekly scale, it further refines this topping signal because it shows institutional selling into a rally's end and is likely followed up by more big money selling into the decline. To look at how this indicator works:
(Click to enlarge)
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