Five warning signs are starting to line up for a possible market correction.

Here are five big-picture risks I am watching:

1. Consumer sentiment is collapsing while the market is near all-time highs. Michigan Consumer Sentiment has fallen to extreme lows while the market continues pressing higher. We saw a similar divergence in 2021 before the 2022 correction.

2. Markets often test a new Fed Chair. Leadership transitions at the Federal Reserve can create uncertainty, and markets have a tendency to probe that uncertainty.

3. The generals may be weakening. NVIDIA helped lead the market higher, but it is now diverging from recent market highs and nearing correction territory. When the strongest leaders stop leading, the broader market can become more vulnerable.

4. Speculative stocks are reversing. Quantum stocks have gone parabolic and are now reversing after several gap-continuation moves. These are tertiary names tied to the broader AI trade, and speculative excess often cracks before the broader indexes do.

5. The S&P 500 dividend yield is near historic lows. That does not automatically mean prices must fall, but it does show how much of this market is dependent on continued price momentum rather than income support.

The bigger point:

Shorting new highs just because the market “feels expensive” can be a fast way to lose money.

Bull markets can go much farther than most traders expect.

The better approach, in my opinion, is to look for evidence that short trades are actually starting to work again.

That is where systematic trading can help.

Recently, short-side algorithms that have struggled for much of the rally have started showing signs of life again. For example, V-Reversal has had a difficult short-side environment recently, but this week it began picking up gains on a couple of short trades.

That kind of shift matters.

It may be early. It may fail. But it is the type of evidence I want to monitor before assuming a correction is becoming tradable.

For short-term traders, one of the best approaches may be:

Test the short side. SIM trade shorting rips. Watch whether bearish setups begin following through. Deploy live capital only when the market starts confirming the thesis.

The goal is not to predict every top.

The goal is to have a process ready when the market environment changes.

Corrections create opportunity — but only if you survive the early false starts.