Do you hear anything? Exactly! There wasn’t much fanfare as the DJIA made another all time closing high.
The room seems very quiet, as all the noise appears to be coming from the BABA party next door. All the attention was on the BABA IPO, while many were exiting the party here. Certainly many of them went to join the BABA celebration, while some have decided to pack it up and move to the sideline or elsewhere.
As the DJIA made a new closing high, many stocks put in reversal price action. And since it was triple witching OpEx on the same day the DJIA made its latest closing high, lot of people look upon this price action as due to OpEx, rebalancing of index and quarterly ending adjustments. This might be the case, but certainly the price action warrants a defensive shield be erected just in case the deafening silence is not a temporary phenomenon, and in case it turns out to be the music has come to a stop.
Just because the market might have topped out, it does not mean one should sell everything. In life, there is this 20/80 rule and so is in the market. 80% of the stocks follow the trend of the market. What this implies is the odd has shifted to favor the short side of the trade, and that more stocks will be on the down trend versus those that will be on the up trend. But it certainly does not mean there will be no stocks on the upside. It's just more difficult to find those 20%.
In order to make certain this price action is not being distorted by the triple witching and rebalancing, one needs to monitor the market for clues to invalidate this non-confirmed high by the DJIA. More importantly, monitor the market for confirmation that it has indeed put in a top. Remember, cash is a position!
