Market players are so used to lopsided action to the upside that they tend to become very negative, very quickly when we have a dip. In the old days, before the Great Recession, some ebb and flow was normal. We didn't expect the market to go straight up -- and that actually gave traders an advantage.
Although there are many folks lamenting the weakness today, it actually gives the market a normal feel. It makes sense that there should be some profit taking at this point, and that overbought conditions should matter. We need to have stock rotate from one group to another, and this is how it should occur.
If we have a weak finish today, the top-calling bears will grow much louder, but it is going to take more than a day or two of selling to really change the character of this market. That doesn't mean we should be blithely bullish, but there isn't any good reason to race for the exit at this point.
When we have this sort of action, my reaction is to focus much more carefully on managing positions. Playing defense often feels like a mistake when we bounce back quickly, but you have to impose discipline on yourself -- and make sure you are prepared should risk increase. If you manage the small stuff, the big stuff will take care of itself when a real market turn does develop.
One thing that is keeping me optimistic is that this action is exactly what we need for individual charts to develop better. I see quite a few that have great potential, if they can consolidate a bit or pullback to some support levels. I grow extremely tired of the endless chase, as I'm sure many others do, as well. Buying some dips feels like the old days of trading, but just don't count on them to last long. There are lots of folks anxious to buy weakness -- and they panic fast when we start making new intraday highs.
Little Huttig Building Products (HBP) is finally coming out of its base on good volume. Richmont Mines (RIC) is a promising-looking gold chart; and Five9 (FIVN) has gone parabolic on a recommendation. I'm keeping stops tight, but I'm looking to make some buys as well.