Will today’s profit-taking turn into something worse?

I think today’s market downturn is nothing more or less than profit taking. It’s not surprising that investors and traders would sell Amazon (AMZNWealth Strength IndexAAPL is Extremely Up and trending Up), for example, today (down 2.19%) since the shares were up 11.6% for the past 30 days as of September 4.

The entire NASDAQ Composite was off 1.19% today as everyone used the Congressional grilling of Facebook (FBWealth Strength IndexAAPL is Extremely Up and trending Up), down 2.33%, and Twitter (TWTRWealth Strength IndexAAPL is Extremely Up and trending Up), off 6.06%, as an excuse to take profits in the technology sector.

But this isn’t–yet–a sell off in the U.S. market as a whole. One big piece of evidence that we’re well short of the kind of sell first/think later panic we see in major sell offs is the action today in Apple (AAPLWealth Strength IndexAAPL is Extremely Up and trending Up) shares. Sure, Apple was down today, but the drop of 0.65% after the stock climbed 19.6% in August shows that a lot of investors are still making selective decisions on what to sell.

Which doesn’t mean that the market can’t take a sudden turn for the worse. The emerging markets crisis continues to gain steam with no fundamental turnaround in sight. The iShares MSCI Emerging Markets ETF (EEM) fell another 1.42% today. The MSCI Emerging Markets Index is now down 19.7% from its January peak. That puts the index on the edge of bear market country. The crisis continues to spread–with Saudi Arabia joining the hit parade today. The MSCI Emerging Markets Currency Index fell 0.2% to its lowest level in 16 months.

As the week progresses watch traditional hedges on downside volatility such as gold (up 0.4% today for the biggest gain in a week) and the CME S&P 500 Volatility Index, the VIX, for signs that fear is spreading in the general market. The VIX, often called the fear index, closed 5.7% higher today but at a 13.91 end of day price the index is still well below the kind of spike that accompanies a general slosh toward fear.

Also watch the U.S. dollar, a key driver in the emerging markets crisis. A stronger dollar isn’t good for these markets and will push them lower. The Bloomberg Dollar Spot Index was actually off 0.2% today after reaching the highest level in three weeks.