The price action of the market has undergone a major change in character today. We will see how we close but currently this is the second major "trend down" day of the year. Back on January 3, the S&P 500 fell 2.4% and closed at the lows of the day. That pullback was totally reversed the next day when the S&P 500 gained 3.35% but this time the pullback is coming after a much bigger run as the indices head into some key technical overhead.
A close at the lows of the day will embolden the bears as it is a major change in the character of the action. Does that mean that the uptrend is over and we should start thinking about testing some support levels?
Maybe, but you don't need to make predictions in order to know that the prudent move is to take some defensive action. The important thing is to keep losses contained and to keep your portfolio as close to its highs as possible.
From a trading standpoint the best way to produce stellar returns is to make sure you keep your account as close to highs as possible. Making losses is hugely unproductive and if your account is at highs then you have the great benefit of compounding your gains more effectively.
This market has undergone a change in character today. It may just be a "one and done" situation but we have no way of knowing for sure. The important thing is that you take fast action to assure that the losses you might be suffering today are not accelerating. That doesn't mean dumping everything that is done. Just make sure you have a plan and some clear stop levels in case this selling intensifies.
It is going to be interesting to see if the buyers show up in the last hour for the 12th straight day but I think strength will be sold this time.