Remember, NOBODY holds up a flag saying it's time to sell. There are a million reasons to sell, but only ONE reason to buy. That being said, last week's news is something we haven't seen in quite some time. I think traders/investors take heed. Oh, it's not a one-off event. You see, after such a strong rally there has to be a reason to 'take some off'. Any excuse will do of course, and the more fearful that warning is the better. The big question...are the other 'Dubais' out there, or is this just isolated? Was Societe General alone? No. They thought Bear Stearns was isolated, too...I don't have to tell you what occurred following that disaster, although it did take time. If this is a shift in character, it won't take long to see it (or feel it).
Tag >> bear stearns
One longer-term indicator I've watched with interest is the Uptick Rule (in which stocks cannot be sold short without first having an uptick). This rule was put in place in 1938 after the sharp drop in 1937, as a means to slow down the crash-like drops that can cascade very quickly without such a barrier in place.
Isn't it interesting that the uptick rule was eliminated on July 6, 2007? Note the sell arrow on the chart of the Dow "Diamonds" ETF (DIA) which trades about 1/100th the value of the Dow Jones Industrial Average on that date. The uptick rule was eliminated as it was claimed to be a relic that modern technology no longer required.