Small caps, transports, and homebuilders are clearly lagging early on, all three former market leaders which still merit your attention. The most logical reaction to the selling this morning is to look for a standard late-spring broad market correction to materialize. If that is going to happen, however, we will likely need to see dip-buyers get punished far more harshly than they have at any time in 2013. Overall, traders who have taken on the risk and bought support have been rewarded fairly well this year.
At the same time, the market has been skittish in holding a clear, sustained trend higher over the past few weeks. That type of action usually compels traders to trade around positions, such as what we did with the BBRY long inside 12631, scaling profits into the spike earlier this week. Indeed, staying agile and small in this tape still appears to be the name of the game.
Gold and silver also look to be rolling over for some unfinished business at recent lows. But the emerging market and materials stocks are not getting hit quite as badly as you would think given the weakness in many commodities.
Headed into the afternoon, I am on the lookout for both longs and shorts, keeping cash levels still relatively high. Bulls would likely need to see today be the brunt of the selling before charts cool off the rest of the week, while bears of course are playing for the big May rollover, starting today.
