I do not make major market direction calls. I simply react as the character of the market action shifts. I mentioned yesterday that there were some subtle signs of change, which were hidden by the misleading DJIA and I'm seeing further signs of change today.
The indices are hitting lower lows in the early going after a brief bounce try. Poor earnings from some chip stocks are providing an excuse for selling and the iShares 20+ Year Bond Fund (TLT) is breaking some key support levels. Breadth is running about 2 to 1 negative and the number of new highs is contracting fast.
The main problem is that I simply don't like the price action in the individual stocks I'm watching. The strong momentum has fizzled out and reversals are occurring, so I am closing out those positions. I am inclined to add to a position in Direxion S&P 500 Bear 3X (SPXS) , but have yet to do so.
I have no idea if this is a major turning point, but the character of the price action has shifted sufficiently to make me more cautious. I'll let someone else make the big headline calls. My job is to focus on protecting capital and to wait for better opportunities to develop.
Some market players will scoff at the idea of caution when the uptrend has been so strong, but my focus is on keeping my accounts as close to highs as possible. When individual stocks are giving back gains, then I have no choice but to cut them and raise cash. I am bearish by default -- not because of conviction. If it turns out that I'm overly cautious, then I will look to rebuy positions.