This invention provides a system and method for confirming the proper placement of a penetrating catheter into a vascular compartment without undesirable arterial cannulation using principles of oximetry in which blood from the penetrated region is subjected to light of a plurality of wavelengths and detected for absorption levels. The result is analyzed by a processor and the level of oxygen saturation of the blood is indicated. The characteristic level of saturation informs the practitioner whether oxygenated arterial blood is present due to an inadvertent puncture. The catheter is introduced using an introduction needle. Thereafter the needle is removed to allow blood to communicate with sensing elements that consist of a light-emitting LED array and opposed photodetector. Light in the infrared and visible red wavelengths can be provided by separate LED units. Aspiration of blood through the catheter by an attached syringe allows the processor to compute the level of oxygen saturation, based upon detected light absorption of passing blood, using the Beer-Lambert law. The sensing elements can be miniaturized so as to be located in the distal tip of the catheter, and can be operatively connected to an external connector via embedded leads that connects a base unit with the processor and a display of saturation level. The catheter allows subsequent insertion of a guidewire and, after catheter removal a CVC.