You need a game plan. Let me give you one. This rally is predicated on two issues: retail sales being stronger, signifying a stronger economy, and Europe being goaded into fast-tracked action to print money and issue euro bonds in conjunction with an International Monetary Fund (IMF) backstop.
The first point is just plain true. It takes a lot of pressure off owning retailers and pure domestic plays. It allows us to hold on to the Honeywells (HON) for a couple of days. It should reconfirm your ideas to own higher yielding and paid-to-wait stocks -- think Nucor (NUE), Eaton (ETN), Waste Management (WM), Dow Chemical (DOW), Dupont (DD) and International Paper (IP). If they run too much, you can sell some of them, too. If you own companies that are leveraged to U.S. government spending (here I am thinking of defense and quasi-defense stocks such as United Tech (UTX) and Boeing (BA)), they should be sold tomorrow. Proceeds to the Bristol-Myers (BMY), Home Depot (HD), and McDonald's (MCD) are contingent on higher yielders that are safer.
But I don't trust Europe at all. It would be terrific if they got their act together and started their backstopping. However, we can't rely on it. So split the difference. Own the stocks that have traded with Europe as we saw last week, here I am speaking of Caterpillar (CAT) and Cummins (CMI), for a couple of days. However cycle out of global banks which should not be able to rally very wrong.
The toughest calls? The Googles (GOOG) and Apples (AAPL) and tech in general. You don't need to start scaling out of those until later this week. But you will have to scale out.
What if the Europeans are serious this time? You will do fine in the higher yielders, the paid-to-waiters and one or two high fliers per 10-stock portfolio.
Otherwise, the risk is just too great.