This column was originally published on RealMoney on May 8 at 3 p.m. EDT. It's being republished as a bonus for TheStreet.com readers. For more information about subscribing to RealMoney, please click here.

I don't pretend to be able to forecast the market in the short run, so I don't have an opinion about the next couple of weeks. However, I do attempt to reduce risk by moving to cash if my longer-term or intermediate-term indicators weaken in a meaningful way. And while there has been some softening in these indicators, they remain in bullish territory.

Let's look at an intermediate-term indicator that attempts to forecast market direction over the next two to six months. This is the CBOE Put/Call Ratio, which measures the ratio of put volume to call volume in individual issues.

The five-year chart below shows the

S&P 500

in black and a 10-week moving average of the CBOE Put/Call Ratio in red. The green trend lines relate to the three-year moving average of this indicator and its standard deviation. As you can see, this has been a very stable indicator over the last few years, with no discernable trending.

After recording bearish readings in January, this indicator vaulted higher as the market corrected in early March. It went to a very bullish position and has backed off only slightly, currently giving a bullish reading. It would be very unusual for a significant correction to begin while this indicator is at this level, but additional market strength or even a sideways consolidation certainly could change things.

S&P 500 vs. CBOE PUT/CALL

Click here for larger image.

Source: TheAstuteInvestor.com

But let's not try to forecast the indicators. It is hard enough to simply interpret them as they give current readings. Currently, this indicator is rated bullish, and my other two intermediate-term indicators are split: One is very bullish and one is neutral.

Because my long-term indicators remain bullish, my target cash position for my IRA remains at a low 4%. My actual cash position as of May 4 is 8.4% due to a late-week sale that wasn't matched by a purchase, not a stance on the market.

Unemotional Sales

Last week I eliminated my position in

Bio-Rad Labs

(BIO) - Get Report

after the company reported down earnings for the first quarter of 2007. This is a mechanical action for me, in that I automatically sell any holding that either reports down earnings or forecasts future declining earnings.

Whenever I purchase a stock, I automatically know under what conditions I will sell that stock. In addition to declining earnings, I will sell any stock that is no longer attractively valued because of a price increase. I also sell any stock that I have held for seven months and that no longer appears on my screening system as a buy. Having these sell rules is invaluable; I view selling as an important activity that most investors don't handle very well.

Two New Names

Last week I also reduced my position in

S&P Depositary Receipts

(SPY) - Get Report

in order to raise funds for two new purchases:

Consolidated Graphics

(CGX)

and

CF Industries

(CF) - Get Report

.

Consolidated Graphics is a commercial printing company. This isn't a very exciting business, but CG has been fairly aggressive in making acquisitions to boost growth.

Over the last three years, sales have grown at a 10.2% rate, not far below the median company in the business services industry at 11.9%. Over the last year, CG's sales growth has been equal to that of the median company in the industry. CG has a return on assets of 8.4%, compared with an industry median of 6.7%. I believe it should sell near the industry median enterprise value/EBITDA ratio of 10.7, but it actually sells for a 21% discount at a ratio of 8.4.

It is interesting to note that I sold this stock about two weeks ago after I'd held it for seven months and it failed to appear on my screening system. At that time, CG's relative strength was the problem. Since then, its relative strength has improved, and the stock has reappeared on my screen. Again, the sale was a mechanical, unemotional action that has now been reversed.

CF Industries is a fertilizer company. All of the stocks in this business have been very strong over the last several months, reflecting the improving outlook for plantings, especially corn. I believe it is clear that earnings will be good this year; in fact, first-quarter earnings were strong for this company.

The real question is whether or not this year represents peak earnings for the company. If so, even though this company sells at a very low enterprise value/EBITDA ratio of 6.6, it might not perform very well.

However, politicians can't seem to put out enough praise for ethanol and, in spite of the questionable benefits for overall energy usage, seem determined to continue to talk about it. Plantings could stay strong for several years, and that would certainly help the fertilizer business. At a minimum, the positive commentary should continue for the rest of this year, and there is potential for positive surprises in earnings.

Portfolio Performance

The performance of my IRA has pretty much mimicked the market this quarter. I view this as satisfactory, given the strong performance of the first quarter. Of course, I'll try to extend my lead going forward. (For a complete explanation of my investing method,

please click here.)

Here's the current listing of the holdings in my IRA:

Please note that due to factors including low market capitalization and/or insufficient public float, we consider American Dental Partners, Amerisafe, Boots & Coots, Buckeye Technologies, Cal-Maine Foods, IntegraMed America, New Frontier Media, Nexstar Broadcasting, Quadramed, TBSI International and Twin Disc to be small-cap stocks. You should be aware that such stocks are subject to more risk than stocks of larger companies, including greater volatility, lower liquidity and less publicly available information, and that postings such as this one can have an effect on their stock prices.

At the time of publication, Moore was long American Dental, Ameriprise, Amerisafe, Apria, Asbury Automotive, Becton Dickinson, Boots & Coots, Buckeye Tech, Cal-Maine, CF Industries, CGI, Consolidated Graphics, IntegraMed, Kinetic Concepts, Methode Electronics, New Frontier Media, Nexstar, Novamerican Steel, O'Charleys, Quadramed, Sauer-Danfoss, Scholastic, S&P Depositary Receipts, TBSI, Twin Disc, Valspar and Warnaco, although positions may change at any time.

Richard Moore, CFA, has 40 years of experience in various facets of the investment business. He has been employed by banks, mutual funds and investment advisory organizations during his career and has also owned retail and service businesses. Under no circumstances does the information in this column represent a recommendation to buy or sell stocks. Moore appreciates your feedback;

click here

to send him an email.