You Can Always Hop Back In

On my video recap yesterday, I talked about the advantages of being an individual, retail trader. The main one is that you can freely move in and out of the market as you deem appropriate. Indeed, the time to be an aggressive bull was in the first few months of the year. Now, however, the tricker “acceptance” phase of the market is making things difficult for just about everyone, since the market is not going to make it so easy for longs, even if it is obvious we are in an overall bull run.

It is precisely because of that shift in psychology, coupled with slowing momentum and the recent slew of faded breakouts after the past three Monday rallies, that I began raising my cash levels over the past week or so, currently with just under 80% cash inside the 12631 Trading Service. I am not looking for a major top leading us towards a huge bear market. Historically, a 4-6% sharp but swift correction would be appropriate within the context of a bull market. However, the more important point is that as momentum slowed it was correct to back off the aggressive long side case, if only for a few days or weeks. Even if today marks the extent of the selling, there will be safer and higher quality entry points next week (the market is closed for Good Friday) as charts reset.

Cash is most certainly a position for the individual trader, and you should feel no guilt about cutting long positions even in a bull market. You can always hop back in, as opposed to the bulky mutual fund manager who has to slowly leg in and out of massive positions. I will be back later with more specific analysis about technical levels that I am watching today. For now, though, remember to use your agility as an individual trader, which can often mean selling positions only to re-buy them at a later date when they have had time to reset again.