I think many of you will find this article interesting as I show several different indicators which point to an imminent correction for stocks and precious metals.

Last Wednesday's report I showed how the current price of the index was almost identical to the January peak from where prices dropped nearly 10%. The report was called "28 Day Sector Rotation, Commodity & Index." We did get the first sign of topy market last Friday with the sharp one day sell off as I expected.

Today, one week later we are now that much closer to a 3-8% drop which is shown in the charts below. It's important to remember that bottoms tend to happen quickly while a market topping is more of a process which is why so many people take big losses trying tip a top.

The market will continue to move up even when it is way overbought. It's only when extreme levels are reached that tops can try to be played.

The Volatility Index - Measures Fear & Complacency in the Market

While the VIX is not something I follow on a daily basis it is important to keep an eye on it. When extreme low levels are reached we know the market (John Dow traders) are feeling confident and buying up everything they can get their hands on.

I like to trade with the trend but when extreme levels are reached I start looking for a low risk setup to the short side (profit in a falling market) using leveraged ETFs.

As you can see from the chart of the VIX and SP500 below, each time the VIX tested the support level the market made a top. Again the VIX is not a great timing tool but it helps me decide which trading strategy I should focus on (swing or day trading) and if I should be looking to buy or selling the market.

NYSE New Highs-Lows Index

If a chart is worth a thousand words then this chart is worth 2000. It cannot get any simpler that the NYSE new high-low index.

The green line is the SP500 index which is straight forward. The Red line is the number of stocks on the NYSE which have reached a new high.

How strong is the market if is keeps going up while the underlying stocks are getting weaker? Something has got to give and it will most likely be to the down side.

Dow Jones Industrial Average - Daily Trend Chart

This chart adds another layer of clarity. You can see what happened last January when everyone was buying stocks thinking life is good, trading is easy. As my trading buddy David Banister from ActiveTradingPartners.com always says "Buy when the Cry, Sell when they Yell" and that's what I am looking to do.

Today the Russell 2000 index (small cap stocks) sold down very hard. These stocks tend to lead the market both up and down. So the red flag is up and I am just waiting for the market to show me its hand so we can catch the next big move.

Coles Notes on Chart:

• Market is over bought and in dire need of a pullback
• The length of this steady rally is much longer than a normal rally
• The rate as which prices are rising is much to steep to be maintained
• The market is trading at the parallel trend line
• VIX is tell us people are buying and not worrying about any possible drop
• NYSE divergence is screaming Overbought...

GLD Gold Fund Trading

Gold is still in a major bull market but the recent price action from Dec up until now has been down as gold consolidates the large rally from 2009.

Looking at the chart below you can see the mini Head & Shoulders pattern. The neckline has now been broken and prices are falling. I almost had a buy signal for gold two days ago with the small move up and the candle closing above the previous days high. But because the price was still under the neckline (resistance) I decided to stand aside and live another day.

Mid-Week Gold Newsletter Conclusion:

In short, the market looks very strong but from a technical point of view it's about to die of exhaustion in my opinion.

Gold, silver and oil I figure will move together which is sideways or down.

I am keeping a very close eye on things hoping prices unfold in a manor which will allow us to spot a low risk setup in the coming days as I would like to catch this drop if it happen. With any luck we could make 10-15% within a couple days using a leveraged ETF.

If you would like to get my Real-Time ETF Trading Signals please check out my website: www.TheGoldAndOilGuy.com