Playing Defense

 | Aug 08, 2012 | 11:10 AM EDT
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The buyers aren't giving up too easily this morning. The market saw good dip-buying, particularly in small-caps that went green for a few minutes, but rolled back over and is now struggling. Should it take out the opening lows, I expect to see selling pressure increase quickly.

As I discussed in my opening post, I'm moving to a more defensive posture. I've taken some Direxion Daily Small Cap Bear 3X Shares (TZA) and I am cutting long exposure. I'm still trying to find short-term bounces to trade to the upside, but my time frames are much shorter.

I suspect there will be stickiness to the upside for now as the recent strength caught many folks underinvested. They are looking for opportunities to buy on pullbacks and that provides support.  That support will weaken as the bounces fizzle out a few times, but the first few dips tend to attract more aggressive buying.

Blucora (BCOR), which I wrote about the other day, looks attractive on better volume. Direxion Daily Gold Miners Bull 3X Shares (NUGT) is slowly walking back up. Mellanox (MLNX) continues to be a momentum leader, and Coffee Holding (JVA) may be an interesting bottom fish.

I'm definitely not doing any major buying, but this market may hold up a bit longer.

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