It is very slow-going out there this Friday morning as profit-taking picks up and buyers stand aside. The downside is still well-contained, but at this point I'm not seeing much enthusiasm for buying. Stocks are still a bit extended, and further consolidation would not be a bad thing as we wait for earnings season and prepare for a market run at the September highs.
Some flat action in the SPDR S&P 500 (SPY) would actually provide for a decent looking cup-and-handle pattern as earnings start to hit. Keep in mind that a failed cup-and-handle transforms into a double-top formation very quickly. But, at the moment, the action is still constructive, and the bearish arguments are not working.
Amid this sort of action, I try to tighten up stops and not let anything gain too much downside momentum. You have to tolerate some pullbacks if you want to stay invested here, but I'm always ready to re-buy anything I may sell. A good example is in Magnachip (MX). I sold this down into strength a few days ago -- but the stock is now pushing back to challenge recent highs.
We're seeing some action in China-related names, such as in Baidu (BIDU), Sohu.com (SOHU) and Sina (SINA). But, for the most part, the market is just drifting on lighter volume. It isn't great action, but in the overall context of the market it is probably healthy.