Breadth is still positive and the indices are mixed but it is the sort of action we need in order to consolidate recent gains. Oil reversed to the downside after a big gap up as a sell-the-news reaction occurred. Biotechnology is struggling after some bad news in the group, and banks and small-caps are finally pulling back after a parabolic move.
We have over 700 stocks hitting new 12-month highs, but many of them were oils that were sold into the gap. There are some names like Advanced Micro Devices (AMD) and Pacific Ethanol (PEIX) that are still being chased but the appetite for buying highs has declined.
The issue is whether this is a pause that refreshes and sets us up for another run to finish the year, or is the start of something of greater concern? At this point, there isn't any reason to start talking about tops. This is healthy and overdue. There are still plenty of potential dip buyers that haven't been scared away yet.
I've done no buying so far and am not very happy with the way Finisar (FNSR) and other stocks in the optical sector are acting. I'm maintaining some smaller positions and will stick with them for now, but I'm going to tighten up stops and be ready to raise further cash if there isn't some better signs of support fairly soon.