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Despite upside momentum slowing in recent weeks, the bears have had trouble really sinking their claws into this market. We are left with a tape that flops around on a daily basis, making it equally difficult for bulls and bears, swings and scalpers. On the one hand, the 1390 level on the S&P 500 is now acting as tough resistance after previously serving as support. However, the downside follow-through for shorts has been tepid. Sure, there are some standouts on the long side like CRM and LNKD, as well as earnings winners like EBAY, but the overall gist of the market is that it is far more challenging than earlier this year.

A heavy cash position in this spot serves to buttress your portfolio against the whipsaws and randomness of the action, essentially living to fight another day when better odds present themselves. The good news is that the market can change character on a dime, just as it did to start 2012 to the upside. It then changed back in late-March when the uptrend started to slow. The key is being in a proper position with your capital and your frame of mind to pounce. As I wrote in a post last year during the 2011 topping pattern:

Michael Jordan used to say that one of the reasons he went from being just a great player with no championship rings to a perennial NBA Finals victor was because he changed and finally allowed the basketball game to come to him. In other words, as talented as he was, he was previously trying too hard to force the action and “make” things happen–Which led to mistakes against tough teams in the playoffs. It was only when he relaxed a bit and picked his spots more carefully that was he was able to attain the highest level in his sport.

Let the market come to you.