Trade this Market, but don't Buy and Hold Here

The QQQQ has completely negated the head and shoulders top pattern with yesterday's follow through above $42. The only problem we have here is the lack of confirmation by the semi conductors, which still lag near their lows. Moreover, Intel looks like the second shoe is nearly ready to drop as it rolls over into the abyss off of its falling 20-day average. Since INTC is generally the leader for the chip sector, a gap down could have the potential to break support on the SMH (semiconductor holders ETF). We expect this market uptrend to continue, but there are serious signs of weakness here that make us think that large institutional money is using the rallies to sell. Institutional distribution can take place over weeks and even months but just be aware that sector divergences, such as the one mentioned here today, declining breadth on down days, and poor choppy trading in general show that we are getting closer and closer to a correction. On that note, we should once again mention that we would embrace a correction. It will clear out the extra risk in the market and reset the stage with better set ups all around. Likewise this market needs a good dose of increased volatility to reintroduce fear and greed. Complacency over the past months has made pulling money out of the market tougher and tougher. We can manage a correction as it is not likely to blindside us. It will blindside players who have gotten complacent, but that is the nature of the market.