Breakout of Market Blip?

What kind of bad news? Well, the latest Producer Price Index number was up 1% in January. This is the highest monthly rise in the index in 26 years. Then, we got a report that housing prices nationwide fell nearly 9% in the fourth quarter of 2007.

As if those setbacks weren’t enough bad news, we witnessed a slide on Tuesday in the consumer confidence numbers, which fell to their lowest levels since February 2003.

Now given all of the negatives this market has had to grapple with during the past few days, weeks and months, it is telling that we have staged a rally here of late.

So, is this current rally a breakout, or just a bear market blip?

My gut tells me that the current breakout is more of a bear market rally rather than a true bullish move to the upside. That said, if we do manage to climb above 1,400, we could be in for a lot more short-term upside in equities.

The question for investors now is what do we do?

One lesson my father taught me a long time ago is that the toughest thing to do during bear markets — especially during bear market rallies — is nothing.

We all want to be active and make moves with our money, but right now there is just too much uncertainty and way too many unknowns to start putting your serious money at risk.

If you still have your investment portfolio fully exposed to the risk inherent in the equity markets right now, I urge you to pare down your holdings and start building up your total cash position.

Right now, subscribers to my Successful Investing advisory service are sleeping well at night knowing they are safe from the whims of this bear market. More importantly, they have a plan in place that will help them determine when the coast is clear, and when to safely get back into equities with all that cash.

If you’d like to sleep better at night knowing you have a plan in place protecting your serious money, click here.