The forecasts for geopolitics and the markets continue hoisting red flags, even if most pundits and analysts will dispute that. It doesn't assure the market breaking, but does require putting warning flats up on the pole at the same time big-cap Averages are themselves in a flagpole or pennant status.

With the movement of the market so limited on this first non-holiday session, it is fair to say it's mediocre for a Tuesday turnaround, even though that was the expectation for the day; and probably some carry-forward Wednesday. I'm emphasizing not the behavior of a few big name stocks in the news; nor the coming banking earnings reports, but the fact that everyone is generally well invested; with some funds loaded to the gills. They may not realize it, but for the sake of market activities, what they'll do next is some selling, whether or not they plan to. Where that selling occurs is what will make a difference.

This time of year, when a market is poised this high, they become primarily interested in Q4 overall performance for their fund(s) or peer competition as well. Often traders are compensated on how they perform 'relative' to their peers or primarily the Indexes. For the moment that keeps them mostly long but it also means once (or should) the market turn south, that competition is likely to follow in terms of preserving gains under the belt, rather than some sort of heroic proclamation about yet-to-be-seen higher S&P levels.

Daily action - the 'fires of hell' in California have not yet spread to the stock market; but despite the terrible analogy; that's a risk that's pending. It does not mean one should run for the hills so to speak; but to be prepared for the inevitable correction (at minimum) so many analysts contend is not coming.

Now, barring exogenous events (and that's saying a lot because there are a couple that loom dangerously); you can get a correction and not disaster. At the same time, the 'pitch' now is 'as if' markets were attractive values, which even the managers seems to dispute. How so? Because they're gravitating to smaller-cap and even micro-cap stock indexes. I have no argument with them about the relative (and sometimes overlooked) smaller companies; but simply pointing out how that dropping in so-called quality is a hallmark of big cap market leadership pretty much priced out of the ballpark for value.

I noticed that John Vogel of Vanguard fame even opined today about values being stretched; and that PEs of the big S&P types are pretty fully valued. It is actually about as concerned a statement as you'll get from the founder of a fund family that is essentially bullish across the Board and so heavily long that some wonder why they accept new investments. I think if you get (in the fullness of time) something like 'redemption runs', the drama will be real. 

Wednesday's market will probably try (barring news) to give us another day on the upside (perhaps an overall up-dip-up pattern); but risk of a fade later increase and more technicians and market money managers (the human as opposed to strictly algorithmic-controlled ones), must recognizing rising risk.

In my view this is still the 'exhaustion pattern' with rising concern referred to. It doesn't ensure that this gives-up-the-ghost; but the prospects are there.

Bottom line: exhaustion phase began last week; not much on Monday; and a lot of tension on-and-off the tape should prevail this week.