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Correction Time?

Kevin Cook here for Steve...

Monday's 1.25% drop in the S&P 500 probably caught more than a few investors off-guard. An excessively bullish mood on Wall Street usually leads to one thing for certain: complacency-then an emotional rush for the exits. Here was my #1 of 3 facts I gave you on January 2 to kick off the new year...

"The Investor's Intelligence survey hit an extreme of bullishness this week that is usually associated with market tops. The probability of a 8-12% correction to wring out the excesses is increasing every month. Make a plan to navigate it."

So, is this it? Is this "the big one" getting underway? I don't think so. At least my market timing signals tell me it's not. And they worked great to keep us out of trouble and on the right side of the bull last year. But I still have a plan in mind for when my indicators and instincts tell me to get more defensive.

Bottom line: Since the bears and profit-takers took out last week's lows decisively-on strong volume in all the indexes-odds now favor a test of support in the 1790-1810 zone. I'll be concerned if we break 1760-70, but I'll also be buying all the way down because I see earnings season as a catalyst for new highs before a 10% correction.

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Best,

Kevin Cook

Senior Stock Strategist

Zacks Investment Research

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Earnings HQ

Today's Noteworthy Earnings Before the Bell:   ››  WFCJPMSJRCBSH

Today's Noteworthy Earnings After the Bell:   ››  No Significant Releases. Check calendar for specifics.

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TSR INC TSRI Jan 13 +0.02% +1.83%

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