Anyone that has been trading the market recently can't help but wonder how much longer this positive action can continue. The duration and steadiness of the rise won't be sustained forever and there has seldom been a time in the past when the negative news flow has been as extreme as it is now.
Some market participants shrug and assure us that the Fed is not going to let the market slip but even when there is a flood of liquidity there are some pullbacks, consolidations, and drops along the way. The one-sided nature of this market gives it an extremely artificial feel and is a set up for some increased volatility eventually.
As I keep pointing out, it is isn't possible to time when the market might turn. While there are some pundits that like to make these calls, none of them have any track record of accuracy or precision. It is a good way to get attention but a bad way to trade.
My approach to this environment is to stay vigilant and watch for some shift in the character of the action. It may be quite subtle at first, however, the key is to react as some actual change occurs rather than to just try to guess when something might shift.
The main thing I look for is a shift in the price action in the stocks I'm holding. There is no better indicator than my account balances. A drop in my accounts is the best warning that the market may be shifting. When you start losing money, that is the time to take action.
I've found that my biggest losses occur when I don't move quickly on the first day when I have a sizable loss. If I hold tight and don't sell then I set myself off for another day or two of losses.
Losses almost always come faster and more abruptly than gains. If you don't move fast then you will see sharp drops. Keeping accounts close to highs is the best thing you can do in order to compound gains and that means cut losses fast.
I'm seeing some sloppy action in individual stocks Tuesday. My account is negative, although it is still quite mild and I'm not doing any really aggressive selling so far. I'm staying vigilant but it is very easy to over-anticipate market turns.