Change of the market character?

Heavy distribution from the top. Are we embarking on a short term correction of 3-5% or an intermediate correction of 10+-%? No one knows, guess need not, let the market tell us what it wants to do. Either case, be prepared.

Several developments have called the market correction overdue,

First of all, top growth stocks have been quite extended. Look at AAPL or BIDU, the law of normality calls for correction.

2nd, bearish break downs in emerging market. Shanghai stock index has lead the word market out of the recession, but it has been lagging US market badly for the past 6 months. The technical picture of Shanghai Stock index looks very bearish, the deterioration of Chinese ADRs (except a few, e.g. BIDU, VIT, CTRP) over the past several months calls for deeper correction in Chinese market.

3rd, distribution days are piling up. Regardless what the news are which trigger the sell off, the unequivocal selling from big boyz should raise your alert level.

When market starts to correct, it is prudent to raise cash, move off margins, monitor closely the current holdings. In bear phases, next leaders usually emerge as the strongest candidates which go through shallower corrections and show stronger relative strength.

There is no need to sell out all your winners. If you enjoy a healthy gain of 20% in AAPL when it broke out of its last base on Mar 5th, you may decide to sit through the correction. The ability to hold on to big winners over time is the crucial step toward winning big $.