Despite poor reactions to earnings reports from Home Depot (HD) and Kohl's (KSS) , the indices gapped higher to start the day. The spike was immediately sold and the S&P 500 is now close to flat while the DJIA is in negative territory. There is strength in a few places like biotechnology, and breadth is running positive so far with around 4000 gainers to 2500 losers.
What we need to watch for today is a shift in the character of the market action. The pattern of action has been remarkably consistent for weeks with no intraday dip lasting longer than an hour. This is driven by computer algorithms and they keep doing what works until it stops working. When the dips aren't immediately bought then we have to raise caution levels very quickly.
The action in the first 30 minutes of trading is looking different. It has been straight down so far and there isn't any sign of dip-buying. If that persists into the close it will be a change in character that is likely to push a number of traders to take a more bearish stance.
My cash levels are very high due to disciplined selling and the inability to find much new to buy. I sold the last of my position in InMode (INMD) this morning and a few other things, but I added to a position in Livongo Health (LVGO) . I will be looking at some index shorts should the selling pressure continue into the afternoon.
There is a crowd of traders trying to catch a market turn here and they will become more aggressive the longer the selling continues. Stay vigilant and reactive.