A Fool and His Money

I’ve received a number of emails from Alert readers, and from my investment advisory services subscribers, concerning the recommendations that we be patient and pick our spots carefully at this precarious market juncture. All of those emails were positive, and I am very happy that so many readers “get it” when it comes to exercising the virtue of patience. 

Last week, the market saw its first real downturn in many weeks, with equities falling nearly 2% across the board. As you can see by the chart below of the S&P 500, although the market gave back some of its gains last week, overall the trend has been decidedly higher.

I understand if you may have been tempted to take last week’s sell-off as a sign that stocks are ready to be shorted here. But as we’ve seen so often during the past several months, stocks came back strong after a sell-off, and that’s precisely what they’ve done so far this week.

I think the bottom line here still is that it’s too early to short this market, as we aren’t sure how much fuel is left in this rally’s tank. We are, however, pretty certain that right now is not the time to establish any new long positions. The reason being, of course, is that stocks are just way too overextended by just about any technical measure you choose to employ.

I know it may be tempting to jump into this market if you’ve been watching from the sidelines for the past couple of months, but I highly recommend that you avoid the temptation and exercise patience — particularly with your short-term trading capital. Jumping into an overbought market like this is a fool’s game, and you don’t want to play the fool with your money.

If you would like specific advice about what to do with your short-term trading capital, why not check out my ETF Trader advisory service? Doing so is as easy as clicking here.