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I would caution against trading this tape today with any sort of aggression. We are dealing with a confluence of end of quarter/end of month external factors, such as institutional players likely playing musical chairs with their holdings. In addition, we are still working through the trickier “acceptance” phase of a bull run, where we have seen two false breakouts in the major indices–and Russell 2000–over the past two weeks. Over the past week or so, I have lightened up my holdings considerably not necessarily because I think we are on the cusp of a major correction, but rather to take a step back and let the market reveal itself next quarter.
We are still in an overarching uptrend, so calling a top is not high up on my list of priorities. That said, capital preservation and risk management are always part of my strategy. I am more than willing to turn the heat back up on the long side next week and beyond, provided that we see more breakouts hold, as they did earlier this year.
For today, though, nice and easy does it.
