Heavy selling tells us it’s time for a pullback/correction. We expect the major indexes to test their 50-day averages as the next levels of support.
The key index trend setters of Transportation ($TRAN), Semiconductors ($SOX), Broker Dealers ($XBD) and Small Caps ($RUT) have shown us a Bear hand with strong, institutional grade selling that often punctuates the end of rallies.
This is a short-term call. This doesn’t mean we’re downgrading our intermediate-term Buyer’s Edge bias.
Everyone has been waiting for a sell off. Perhaps now enough short sellers have been shaken out that it can happen.
And perhaps not. We only do what the market tells us to. We’d be foolish to expect to never be lied to again. We take our positions and make sure the losses are small when we’re wrong, let the winners run when we’re right.