Don't Throw Caution to the Wind With Your IRA

Last week was an uneventful one, as the major stock market averages bounced around with no apparent direction. While there was some modest improvement in a couple of my indicators, they all ended the week in the same general position as they ended last week.

My longer-term indicators remain solidly bullish. Value measures continue to be positive. The breadth of the market is matching the action of the major averages. Market-sentiment measures are bullish, as short-sellers remain very active, always anticipating the bear market they feel is right around the corner. I cannot find any reason to believe that this bull market that began in 2002-2003 is close to coming to an end.

My intermediate-term indicators remain categorized just as they were last week. One of my put/call volume ratios remains neutral, while the other one remains bearish. This bearish indicator, though, did record some improvement last week. My third indicator, which measures the ratio of odd-lot sales to odd-lot purchases, which has been trending higher because odd-lot investors have stepped up their selling a bit, nevertheless remains in neutral territory.

This set of indicators leads me to maintain my target cash position of 15%. If we were to experience a downward-trending market over the next couple of weeks, I would anticipate that my intermediate-term indicators would improve, and I would then reduce my target cash position. Currently, in my IRA, I have a cash position of 13.5%.