Click on Chart to Enlarge
Today both the QQQ and SPY formed bearish engulfing candlestick patterns. These are top reversal patterns, and should be considered significant if there is a technical overbought condition, a failed breakout on a chart, or a bearish divergence.
Currently, there is a triple time frame (weekly, daily, hourly, and even 15 min) bearish divergence on the MACD of the QQQ chart with other massive divergences in breadth, volatility, and put/call ratios.
So my current suggestion here is that you completely exit all index long positions on the US stock indexes. This has the technical and sentiment back drop for a potential major high, and we are entering the seasonally weak period of Sept/Oct, which should just be an additional factor for the trader to understand here in terms of market dynamics.
Short positions could be established on a break of today's low, with an initial profit target of 1:1 with a stop above today's high. So since this has the possibility for a big move down, you only exit 1/3 or 1/2 the position at the initial profit target. And another option is to just hold the whole position with a stop adjustment mechanism and allow the market to go however far it will until we get a legitimate bottom reversal signal. The pros to the first strategy is a higher win or breakeven rate, but a probably lower expectation given the quality of the set-up. The second scenario likely has a lower win rate but a higher overall profit expectation in my opinion.