Well, it was bound to happen sometime. After eight straight days of gains for the market, the bears finally decided to sink their teeth into stocks on Tuesday. Thing is, as vulnerable as the market was thanks to the 7.0% runup since June's low, today's stumble looks like it could be the beginning of a sizeable correction. Don't misread what I'm trying to say to you. A pullback isn't a new bear market. A pullback is simply the resolution to an overbought condition. Even the worst-case scenario pullback (which I'll describe for you below) isn't going to be devastating. Anyway, we'll look at how everything's taking shape in a second. First I want to introduce you to a new trader that's fought his way onto the site's trading leader-board. Even before we get to that, though, there's something cool I want to show you. Better Than Ever For those of you who've been reading the newsletter for, well, at least a few months will probably already know we've been turning the website into a proverbial Grand Central Station of trader-driven opinion and ratings for each and every stock out there. To put it bluntly, we just know that our fans and followers are collectively smarter than Wall Street's so-called analysts when it comes to doing research and picking stocks. Well ladies and gents, we've taken another big step today. Maybe you've already seen it, but in case you haven't, each ticker's research page now gives you an easy way to attach a comment to your buy/sell rating. Take a look. Technically speaking, you've always had the ability to write a short note about a particular stock, whether you wanted to rate it or not. You've still got that ability too. But, the new feature allows you to link a message to your long and short picks, letting the community know not just what you're doing, but why you're doing it. You'll also see all the recent buy and sell ratings for each stock near the top of each stock's research page at the site. We've mentioned before how the ultimate goal here is to let great traders develop a following. In fact, for those traders that not only do a good enough job at picking stocks but also communicating what's going on in their portfolio, it might even mean a paycheck in the future. That's why we encourage everyone to start using the site as their virtual trading journal. On that note, congratulations to merlintheunicorn are in order. This community member has taken the #3 spot on the site's one-month trading performance leader-board in just three days. If you think you've got what it takes to be the top dog of the trading world - or if you just want a way to keep a log of your trading ideas and picks - then what are you waiting for? The SmallCap Network's trading and commentary platform is second to none, and we've got a feeling it's going to be one of the web's biggest trading communities before too long. You'll want to establish yourself as a guru before that growth wave hits. The Economy is Just Fine All things considered, it was a good day for the economy. Industrial productivity was up, capacity utilization was up, and inflation was up. Yes, rising inflation can be a good thing too, if it reverses a trend that's looking more and more like deflation. That's where it looked like things were going in April when the annualized inflation rate fell all the way to 1.06% after peaking at 2.16% in October. If the inflation rate were to get any closer to zero, or even turn negative, it could be just as disruptive as a recession. We got a glimmer of hope when the inflation rate moved up to 1.36% in May, but June's reading of 1.75% pretty much assures us we're not at any immediate risk of deflation. Problem: If inflation is on the rise with no end to the rise in sight, now the Fed's highly-simulative, easy-money policy is in jeopardy. In other words, now Ben Bernanke could be motivated to quell the Federal Reserve's QE efforts sooner than we had all finally started to agree on last week. [You had to know the discussion was going to come back to the Fed and when easing would stop, right?] That's largely why the market tanked today... the cheap money and worthless dollars the Fed is creating spurs inflation. My take is, handicapping any and all economic data nuggets just to try and figure out when the Fed's bond-buyback will stop is a fruitless exercise. It's not going to happen anytime this year, most likely, as a better employment picture seems to be Bernanke's primary concern. My advice is to ignore all the QE prediction chatter and just do what you'd normally do. The prediction needle has changed directions too many times already, and will likely change again - several times - before it's all said and done. Chasing that trend is just bad for your portfolio. Industrial activity and capacity usage both moved positively last month too. The industrial productivity index cranked up to 99.1 from 98.7, which puts it at highest reading in years. Capacity utilization moved from 77.7% to 77.8%. That's not a multi-year high, but broadly speaking, capacity utilization is on the rise. We need to see positive movement from both in order for the long-term market to remain bullish. Although this data won't stave off a short-term pullback, it should help the long-term trend get going upward again once the near-term correction is over. Speaking of short-term moves... Not Down For the Count Just Yet Yeah, the sellers took a 0.4% bite out of stocks today. That's not chump change, but it's not a reason to go berserk either. I mentioned to you yesterday that we'd want to see two consecutive days of losses to rally say the bulls and buyers were done for the time being. Today's just one day. I will say this... though the volume behind the selling wasn't huge, it was stronger than yesterday's buying volume. If we do end up getting that lower close tomorrow on volume that's stronger than today's volume, I suspect that'll pretty much put a pullback into motion. Another concern: We're finally seeing the VIX start to test the waters of a rebound. If the VIX is being forced higher, that means bearish pressure is being applied to stocks. As was the case with the S&P 500, I'd really like to see the VIX give us another day of today's trend just to make sure the new move is well underway before making a bet on it. Just to start putting the game plan into place, let's mentally mark the 1630 area as our first downside target. That's where a couple of key moving average lines are about to converge. While I think we're due for a bigger correction than that (1630 would be only a 3.2% dip), let's take it one step at a time. Think of it as a checkpoint where we'll reassess how things are taking or not taking shape. The 1563 area is my ultimate downside target, but we can talk more about that when it matters. If the folks at Standard & Poor's get the data up in time, I should have an earnings season report and analysis for you tomorrow. We'll see. We'll have something good for you no matter what, though.