With this widening in the indices, I think it is prudent to either do nothing and respect the fact that there will be broad swings in your portfolio, or make the decision to step aside and live with it. I chose the latter. With the 6+% move that we have seen in the large caps since Jan 1 and the 4 year cyclical bull market we are in, I decided to take the majority of my chips off the table and watch the market with a less biased view.
Last week and earlier this week most of my stops were hit, leaving me with around 80% cash. This was a decision that I made and I feel no worse today after watching the Dow Jones Industrial average close +176 points and making a new multi-year high. I am taming my inner junkie and watching where the market wants to go. We saw similar price action in 2011 and 2012, with the indices ripping to start the year only to see much of the gains vanish in the spring.
The best thing about being an individual investor is that you are able to wait for your pitch. I have no one to answer to but myself. I get to dictate my decisions for better or worse. Who cares if you are wrong for a day, a week or longer? I have made my decision and I am sticking with it until I see new setups with favorable risk/reward.
Shaking out the weak longs is usually healthy for the markets, so to all long, you’re welcome.