Excellent Real Time Example

The current stock market action is an excellent example of a market putting in a high of some significance.

The telling signs are the wide spread swings that have occured over the last 2 weeks. The action today also was a clear indication of a trend shift in equity prices. The market opened weaker and moved considerably lower, only to stabilize and rally in a sizable fashion. The icing on the cake was the late day selling that brought the market negative once again.

This type of action is indicative of a shift out of the strong hands and into the weak hands. The average Joe has become so accustomed to the market snapping back after a brief pause that they are jumping back in with both feet only to have the smart money sell them their positions.

Although I do not anticipate this decline to be the start of a bear market, it does present enough risk to warrant a hedged equity position.

The equity market may chop around over the course of the next week, but the summer as a whole is not going to be pleasant for stock investors.