Is This the Start of a Market Wane?

Today’s market pullback could be the start of a wane in the recent bear market rally. I say could be, because it’s way too early to tell if the steam has run out on Wall Street’s summer bash. I think one thing we can say about this market is that it is ripe for a pullback.

Take a look at the chart below of the S&P 500 Index. As you can see, stocks have shot higher nearly unabated since coming off of their March lows.

This kind of run up is highly unsustainable, which means the chances for a pullback are pretty good. What’s more, if we look at the RSI figure (Relative Strength Index), we see that it is 72.22. Any RSI of more than 70 means that a given index or equity is heavily overbought. It also often signals an imminent reversal of fortune for that given equity or index.

Now, I am not saying that we necessarily will see a big pullback here. However, if we do see a sharp move to the downside, is your portfolio prepared?

If you’ve been invested in equities since March, you’ve likely made a lot of money. My advice to you is not to let that money slip through your fingers. I strongly recommend that you place stop losses on all of your invested positions. By doing so, you will ensure that you don’t give back the ground you’ve made up so far in 2009.

Right now, subscribers to my Successful Investing , High Monthly Income and ETF Trader advisory services have stop losses on all of their invested positions. If you don’t have stops in place to protect your hard-earned wealth, then I invite you to explore each of these services.

Remember, the key to building serious wealth is capital preservation, and a corollary to that key is never to let your profits evaporate. That’s why setting stop losses is so crucial.