Diverging

Some early technical indicators seem to be diverging from the uptrend. I’m feeling it could be the beginning of a correction (maybe 5-10% in most stock groups.) MACD is rolling over in most groups, and in recent days we’ve finished on the weak side, which is not the sign of a market that wants to continue to go higher.

Traders should prepare to close out marginal positions and tighten stops on others if a general market selloff accelerates. Investors (including 401k accounts) should then reduce or clean out this year’s underperformers, and ring the cash register on a portion of their biggest gainers.

I think the correction, if it develops, will provide opportunities to scale into a shopping list of stocks/funds. By industry I’m watching: tech, biotech, select pharma, select energy, gold, and almost anything that pays a solid dividend. I might look at some regional bank ETFs, potentially building strength after several difficult years.