Market Heeds Caution Signs

As for oil, prices closed Monday at their year-to-date highs and edged up only slightly Tuesday to close at $62.93 per barrel, largely due to geopolitical concerns about Iran.

"Nothing has changed since yesterday," says Randy Diamond, trader at Miller Tabak. "Customers are sitting on the sidelines, not convinced they should be putting their money to work here, but they're not necessarily selling either."

Sounds like limbo. How confused is the mind of the market? Here's a snapshot.

Liz Ann Sonders, chief investment strategist at Charles Schwab, told me Monday afternoon that her weekly phone call, in which brokers and financial advisers can call in and ask her anything that's on their minds, was swamped.

Their chief concern this week was the subprime mortgage industry, says Sonders. She has suggested investors be defensive in the stock market this year, as she outlined in this interview for TheStreet.com TV.

As for what investors should do right now, Sonders has words of caution. Individual investors should sit tight, she says. Not every move in the stock market should elicit an action plan, nor should individuals try to time the market, she says. With 32% of trading driven by computers, she says, how can an investor attempt to beat that?

Another trader reminded me that sitting tight is sometimes the best policy. Even in 1987, a year that saw the largest one-day market drop since 1929's famed crash, investors who didn't budge finished up 2% (based on the S&P 500). Such stoicism is easier to preach than to practice, and 2% is not gangbusters, but it's not a loss either.