One of the warning signs I wrote about Wednesday morning is correlating selling. When the pockets of momentum dry up and stocks sell off in tandem then it is time to be more defensive.
That is exactly what we are seeing Wednesday morning. Breadth is running around 6 to 1 negative and the number of new 12-month highs has dropped from around 350 Tuesday to about 50 this morning. FAANG stocks are still showing some relative strength but groups like banks ( (XLF) ETF) are weak and the speculative traders are standing aside.
When this sort of action hits, I tighten up stops, dump some of my smaller tracking positions and am much more selective with my new buys.
The best action in my holdings right now are Workhorse Group (WKHS) , Alpha Pro Tech (APT) , Myovant Sciences (MYOV) , and Kadmon Holdings (KDMN) . There is some weakness in precious metals and I'm inclined to be a buyer on pullbacks in that group.
The important issue will be the close. The dip buyers made one early attempt at a bounce that only lasted about 20 minutes. If they don't make a better try later in the day and if there is a weak close then I'll be positioning for more downside.
There is a shift in price action and I'm reacting as it develops.