Use Caution

 | Feb 02, 2012 | 2:03 PM EST  | Comments
  • Comment
  • Print Print
  • Print

The dip-buyers saved us once, but the bounce fizzled quickly and we took out the opening lows. We still have underlying support, but the market lacks energy and upside progress is becoming more difficult. Breadth is still solid with oil and gold leading, but volume is lackluster and buyers are more cautious.

As I discussed in my opening post, it's almost impossible not to contemplate the potential for a near-term market top. We have been trending straight up for quite a while and there are plenty of solid bearish arguments to be made, but we are missing one thing and that is price weakness. Until there is some notable softness in the market, it is extremely risky to anticipate a market turn.

I deal with this sort of action by taking profits into strength when I have them and continuing to hunt for new buys. Ideally, I find fewer and fewer buys and end up with more and more cash as the market moves to unsustainable levels.

That works pretty well, but I often end up in too much cash too early because sustainable market levels are higher than anticipated. I can remedy that by using trailing stops rather than selling into strength, but the risk of slippage is greater when a reversal finally does kicks in.

I'm adding a few new buys today but, overall, I'm a net seller because more of my positions look tired. If the market keeps running up without any rest, I'm going to be woefully underinvested. But this market seems to invite that position more often than not.

We are still holding up well and I don't see any reason to rush for the exits yet, but you'll have to force it to continue putting money to work. That's all the warning that I need to proceed with greater caution.

Columnist Conversations

Conclusion This is a very quick note to visualize the solar stock peer group. I'll do some individual stories ...
Conclusion SSYS is one of two giants in the 3-D printing arena and is reporting earnings on November 5th, afte...
Market continues to hold onto impressive gains in the last day of a roller coaster trading month. This month ...
UPS is bumping up against a very heavy layer of resistance today. The stock's 1.6% gain has pushed shar...

BEST IDEAS

REAL MONEY'S BEST IDEAS

Columnist Tweets

BROKERAGE PARTNERS

Except as otherwise indicated, quotes are delayed. Quotes delayed at least 20 minutes for all exchanges. Market Data provided by Interactive Data. Company fundamental data provided by Morningstar. Earnings and ratings provided by Zacks. Mutual fund data provided by Valueline. ETF data provided by Lipper. Powered and implemented by Interactive Data Managed Solutions.


TheStreet Ratings updates stock ratings daily. However, if no rating change occurs, the data on this page does not update. The data does update after 90 days if no rating change occurs within that time period.

IDC calculates the Market Cap for the basic symbol to include common shares only. Year-to-date mutual fund returns are calculated on a monthly basis by Value Line and posted mid-month.