The market is making me nervous.  Which means I should be buying.  But is my recognition that I should be buying because the market is making me nervous in fact mean the market is going to go to new lows?  But if getting cautious because I recognize that this is a good buying opportunity because I am nervous mean that the market going to new lows making me even more nervous meaning that the bottom is at hand?  But if the ... (yeah, yeah, we get the idea. - ed.)

The S&P 500 is down 7% over the past four days.  What to do?

First, the things that make me nervous, all which one could see developing last week.

Banks are rolling over.  Again.

The market cannot make a meaningful advance without the financials.

REITs are rolling over.  Again.

I am long REITs through my ownership of the ProShares Ultra Real Estate ETF, ticker URE.

I got greedy.  I had planned to peel off my position when the IYR hit $45.  Instead, it hit $40 and rolled over.  I am holding my original position at slightly above cost trying to figure out what I should do. 

I think REITs are going to fall over the next few days, and if I were a trader with a week's time frame, I'd be pushing it to the short side.  However, the REIT component of the Russell 3000 is yielding 12%, which is too high in my opinion even with the coming bankruptcies in commercial real estate, and the value buyer me says REITs are a bargain.

Gold is rolling over.  Again.

Gold at $2000 may very well be coming some time down the road, but the barbarous relic could fall all the way to $600 and still be in a long-term structural bull market.  In the mean-time, lower highs and lower lows signals deflation, or at least deflationary perceptions by the market.

Now, here is what I do like.

Credit spreads are improving.

The TED spread is at the lowest level since August.  Swap spreads are trending down to the lowest level since June 2007.  Spreads for corporate bonds, from investment grade to junk are also coming in. 

Corporate bond issuance was the greatest in eight months.  From Tony Crescenzi

The VIX, though inching up, is half the level of a few months ago.

Volume is low.

Volume during the sell-off has been low, averaging around 4 billion shares on the NYSE Composite, which is lower than the run-up since November, save a few days during the holidays.

I would not blame investors for selling here. But for the moment, I am sitting on my hands and waiting.