The bulls took a breather today which is to be expected after a nice run the past couple of weeks. Fortunately, the bears are in such poor shape after this big run that they have neither the energy nor inclination to press. We have been expecting some lethargic basing action, and took advantage of the slow down to take some profits and begin to add some hedges.

Volume was similar to yesterday, which was a bit light and we believe that a consolidation is not only healthy but needed before heading higher. We remain optimistic about this market and will continue to search for new buying opportunities as long as key technicals remain in tact. Our level of concern would be raised should the major averages give back too much in addition to increased volume. So far that definitely is not an issue.

While we would always prefer to head higher, at this point we would like to see the profit taking continue for a few more days and even intensify. We need to stir up a little pessimism about the market and build up the proverbial wall of worry for the market to climb.

Other than some minor portfolio adjustments and adding to index shorts, we aren’t doing much more than reviewing the shopping list for new potential winners which we plan to start buying as they set up. TSP members may consider utilizing this weakness to increase their positions.  

Have a good evening