The key to market timing is watching for a change in the character of the price action. We are experiencing that this morning, as the gap-up open has seen some of the most aggressive selling in a while. This is a change in the recent pattern and is being triggered by a "sell the news" reaction to New Treasury Secretary Steven Mnuchin's comments this morning.
Mnuchin didn't say anything surprising, but it is clear that tax policy isn't going to be solidified in a couple of weeks as President Trump has previously indicated.
Given how extended the market has become and the stubbornness of the dip buyers, it isn't a big surprise to see sellers seize on this catalyst to do some selling. What will be interesting now is how quickly the dip buyers will show up. There is no doubt they are lurking and will give it a try, but they may actually wait longer than an hour or so this time.
As I've discussed, I've been selling into strength lately and since I'm not finding many new buys my cash levels are up to around 70% right now. I added to a new position in Ultra Clean Holdings (UCTT) , which I'll discuss in detail later. Global Blood (GBT) is working well following its secondary, and recent pick AXT (AXTI) is strong following earnings.
My preference is for a deeper correction so that some better opportunities will develop, but I'm not alone in that thinking.
We'll see if the action today is the first real shift in price action this year or if it is just another bear trap. There hasn't been any downside action that has lasted more than a few hours so far in 2017.