From the beginning of this week, we have seen SPX YR2 rejection, XIV 2HR2 rejection and VIX above a monthly pivot for the first time since August.

A cautious approach is warranted, and via Total market and tweets I have suggested QQQ short on the day of the highs last week, UVXY if XIV dropped below 2HR1 which it did on Monday; and if this wasn't enough of a portfolio hedge, then SPX/SPY provided the perfect setup on Monday with YR2 rejection.

In early stages of a decline off a relentless trend it is difficult to be too bearish. Total market views have been more bearish over past 3 weeks, and wrong the first week, half-right the second on QQQ and IWM, and looking more correct this week. With SPX YR2 and IWM YR1 rejections happening, we must consider the possibility that key highs are in. Yet with trends persisting, strength in the leader INDU/DIA, and VIX rejection from both 2HP and Q4P today, it could mean another high test in the making or simply that markets will not go straight down.

Best guess from here is limited bounce soon then lower. VIX is the key - if below all pivots on daily close, have to be bullish. Above OctP, cautious warranted.

Last note - often what holds up the best in a decline is the next leader. FXI and INDA both positive today; FXI held near test of YR2 as support, and INDA also above YR2 looking ready to breakout up.

SPY, VIX, FXI and INDA below.