The market's strength this week surprised many investors, and certain sectors have still more potential, writes MoneyShow senior editor Tom Aspray. But those who are very long on stocks should maintain their defensive stance right now. On November 17, my weekly column was headlined "Don't Bet Against the Stock Market." It was written after stocks had corrected from the October highs, and many were suggesting that the October rally was just a "bull trap." At the time, the Spyder Trust (SPY) was at $121.97 and the Dow Industrials stood at 11,796. Both dropped another 4% to 5% before bottoming just after Thanksgiving. Now SPY is over 15% higher. So why would I still bet on the stock market? Make no mistake, the risk in the major averages is obviously much higher now than it was then. And as you probably know by now, I feel managing risk is the key to successful investing. This means not only managing the risk on each position, but also on the entire portfolio. At current levels, I would recommend that one have at least 20% to 30% in cash, and that new positions be purchased using the proceeds from the sale of existing positions. The Charts in Play portfolio now has 15% to 20% more in cash than it did just a month ago.

pubblicato il: 17/03/2012 - 01:53