It would be prudent to prepare for the worst and if it turns out it doesn't take place, then at least you were prepared... I don't mean sell in panic, but keep it in the back of your mind not to hold weak looking positions.
Weak looking positions would come from two sources...
1) Extremely chart wise looking overbought issues (even strong fundamentals). You may want to take some off the table and chart wise favour toppy looking issues as tops instead of continuation patterns.
2) Poor Fundamentals and mo mo buys.
Shades of 2008 memories come calling with the broad market reaction I saw this Wednesday... Wednesday is the strongest day of the week with some of the best pops snaking new highs... Some of my best looking prospects sold hard on good news releases and generally my watch list moved down on volume... If this type of action doesn't change by next week you will see selling beget selling on good gains to cover swelling losses on bad losers. Not all will drop such as mid and big caps, but overbought small caps may dive like Hawaiian cliff divers...
In a broad market reversal, buy signals are not much more than bull traps as selling into strength overcomes most of the buy signals, breaking down a winning streak average into a losing streak average.
The Santa Rally and the January Effect have been (PRICED IN) allowed for in the continued show of strength into January... I feel a correction out of character for this period may be shaping up.
It appears that cash may be able to take advantage of some baby out with the bathwater type buys, so as it is a personal assessment of your own holdings,... dumping obvious weak holdings to preserve cash is not without some serious consideration.
While I don't necessarily agree with the complete assessment here, I definitely saw the bulls move to the sidelines and some heavy distribution of wealth take place. If it cascades, some cash on hand would be a great thing to possess.
Bulls-move-to-the-sidelines
We are in a usually strong time of the market timeline (Dec 24Th to April last week),and a correction for the moment, could dampen what would otherwise be a good time to rely on buy signals and turn into a bull trap... be cautious and don't chase!
In response to the potential broad market correction potential I have been putting together a chart for bottom picking baby out with the bathwater picks in the small cap arena... You will need to visit StockCharts Public Chart List and and I will label it to load in the number one position... Even if your not a real-time extra member, you should be able to see the entire presentation
GLTA Lostoutwest
Kenuck SmallCap Trader
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Grandich
StockCharts Public Chart List
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