The indices are well off the early lows Tuesday afternoon, but the question is whether they will manage another strong finish.
The automatic buying of any dips smacks of compliancy, but in the age of algorithms, patterns tend to repeat much longer than they have in the past.
In the 'old' days, the conventional wisdom was that when a pattern becomes common knowledge, it tended to stop working as traders anticipated it and undermined the movement. These days, once a pattern becomes common knowledge, a bunch of programmers develop a computer algorithm that keeps repeating it every day. This gives the market a much more manipulated feel, but that has been the environment lately.
I've cleared out quite a few smaller positions today and raised some cash. I tend to accumulate small positions as I make partial buys and sells, and I find it helpful to clear the decks every once in a while. Many of these stocks aren't doing anything wrong, but they require some mental and emotional energy, and it is refreshing to have fewer names to watch.
One trade I did initiate today was a short of the biotechnology sector using Direxion Daily Biotech Bear 3X ETF (LABD) . This is a fast moving ETF, but if the market does start to correct a bit more it is likely that biotechnology will be one of the first groups to struggle.
The indices are rolling over again as I write, and we'll see if the dip buyers give it another go.
A close near the lows of the day will be a significant shift in the market action.