Read MoreCorrection? S&P first has to clear a technical hurdle
If you understand where a 10 percent pullback is located, you will have the opportunity to take advantage of this temporary correction in the trend. A fall below 10 percent is a signal of a potential trend change.
A 10 percent correction in the DOW would bring the market back to the center line of the long-term uptrend. That's still bullish in anyone's language. A 10 percent correction on the NASDAQ would bring the market back to just above the support level and still well within the long-term up-sloping trading band.
A 10 percent correction on the S&P is more serious. This would drop the S&P below the support level near 1850 and below the lower edge of the long-term Guppy Multiple Moving Average (GMMA). This development would signal a high potential for a major trend change. The S&P is the canary in the coal mine.
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You have a choice: Join the screaming chicken littles or watch the charts and act accordingly. I know what we will be doing.
Daryl Guppy is a trader and author of Trend Trading, The 36 Strategies of the Chinese for Financial Traders – www.guppytraders.com. He is a regular guest on CNBCAsia Squawk Box. He is a speaker at trading conferences in China, Asia, Australia and Europe.