The indices are holding fairly steady with a big boost from Apple (AAPL), but under the surface we are seeing some profit-taking, especially in small-caps. Every major sector is now in the red, with precious metals, coal, oil and commodities leading to the downside. Breadth has slipped to better than 3 to 1 negative, but the weakness is being hidden by Apple, IBM (IBM), Google (GOOG) and a few other big names.
After the move we have had, some run-of-the-mill profit taking makes sense. Just keep in mind that markets that are hitting their highs seldom reverse and go straight down. The great likelihood is that the dip-buyers will step up a few times, especially since so many underinvested bulls are still anxious to find entry points.
After a day like yesterday, I tend to focus much more on not giving back profits. My accounts are at all-time highs, and I want to keep them that way. That means selling very quickly when anything slips and making sure I lock in some gains on better-acting names.
My primary goal as a trader is to keep my accounts as close to their highs as possible. That can cause some underperformance in straight-up markets like we have had so far this year, but it pays off nicely when we do have a correction. The most unproductive thing you can do is make up losses. There are always new opportunities, so if you protect your capital well, it is much easier to keep it growing.
I'm hopeful that profit-taking will reset some charts and give us better trading opportunities. This isn't very good action under the surface, but it is healthy and not a reason for any major concern at this point.
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