The market has been in stealth corrective mode since February, failing to post new index highs, while sector after sector loses relative strength. Shareholders who have ignored the warning signs face tough choices in coming weeks, because profits and perceptions will be challenged, just like they were in the spring and summer of 2010.

While this year's correction should be less volatile, without a gut-wrenching "flash crash," the risk to overstuffed long-side portfolios is just as great, because the market has run into a brick wall of obstacles and cannot benefit from the supportive forces that were in place just 12 months ago. As a result, I strongly recommend that readers take steps now to protect their hard-earned profits.

Why will this be a tough period? For starters, the market has nearly completed the mean-reversion event that started in early 2009. Saying it another way, we plunged during the bear market and then recovered in a V-shaped rally that has lifted us back into pre-crash levels. That activity is now complete on the Nasdaq-100 and Russell-2000 indices, but not on the

S&P 500

.

We're also headed straight for QE2's June termination, as well as an inevitable cycle of interest rate hikes. The banks already sense this seismic shift and are acting accordingly, by underperforming the broad market and threatening to break down. Amazingly, a few folks still expect the

Fed

and government to apply even more stimulus, but that's just a pipe dream, as a massive debt bomb takes center stage and the 2012 presidential race gets under way.

Given the negative backdrop, what can you do to protect bull market profits and survive a long, hot summer of challenging price action? Without question, options offer the best protection, because they let you let you sleep at night while you remain long and strong through a correction. But not everyone feels comfortable in this highly technical market, because you can pay dearly for a single misstep.

For options-challenged readers, the next best step is to lighten up on growth stocks and add exposure to defensive plays that pay solid dividends. Of course, you've already taken a big hit on big tech, such as

Apple

(AAPL) - Get Report

and

Google

(GOOG) - Get Report

, but the group has a poor mid-year performance record and could head even lower before finding strong-handed buying interest.

MO Daily Source: eSignal

Altria Group

(MO) - Get Report

offers a profitable alternative to our typical four-letter favorites. This classic defensive stock has been roaring higher in a strong uptrend since the bear market ended, lifting to an all-time high in October of last year, when it rallied over the 2008 high at $24.55. It then paused into 2011, building a high cup pattern on top of new support.

The rally hit $27.15 on Friday, giving way to a pullback that just filled the breakout gap between $26.25 and $26.40. The company reports earnings this morning and, as long as a decline doesn't drop below $25.80 or so, any pullback should offer a low-risk buying opportunity. And I saved the best part for last: Altria pays a 5.60% dividend.

What's the next step to get your spring and summer portfolio in working order? This one requires a leap of faith, because it seems counterintuitive. Simply stated, I would start to lighten up on commodity-based positions, including precious metals, taking profits on underlying companies first and then working through ETF proxies for the actual materials.

In a nutshell, higher commodity prices are unlikely to survive the end of qualitative easing and the start of an interest rate tightening cycle. In addition, the exit door for commodity positions will get smaller and smaller in the second quarter, as calendar dates approach, with the likelihood of a major distribution event undermining a big share of profits in a relatively small period of time.

SLV Weekly Source: eSignal

This weekly continuous silver chart says it all. The contract has been on fire for months now and is finally approaching the peak of the parabolic Hunt brothers high, posted in 1980, when the boys tried to corner the silver market. This will be a natural level for speculators to abandon the white metal and move on to other opportunities.

So, does silver turn south when it gets right up to $50, or do folks see the historic high coming and try to get out, ahead of the crowd? I don't have the answer, but my Elliott Wave analysis says the contract has now reached a major 5th-wave extension. This information gave me the courage to finally sell my

iShares Silver Trust

(SLV) - Get Report

shares this week, which I bought in November.

Here's a final step to insulate your portfolio. Set aside a chunk of capital for strategies that let you flip in and out of positions in one week or less. Then use high/low stochastics swings to pick out entry points in stocks that show breakouts, breakdowns or pullbacks. The rest is risk management, to defend against outliers, such as a bad earnings report or a nuclear meltdown.

ILMN Daily Source: eSignal

Illumina

(ILMN) - Get Report

posted a lower high on April 1 and pulled back in a persistent bull flag pattern. The 5-3-3 stochastics dropped into the oversold level and stayed there for the last eight sessions while the stock cut through the 50-day moving average. There's nothing to do here until price perks up and challenges flag resistance, which has now roughly aligned with the broken average.

A buying spike over $68 will trigger a breakout, at the same time that stochastics pops off the oversold level. That will likely signal an uptrend that tests the three-week high at $71. Taking profits on a rally into that level, at the same time that stochastics hits the overbought level, offers a perfect example of a short-term strategy that could work well in a midyear correction.

At the time of publication, Farley was long AAPL and MO, although holdings can change at any time.

Alan Farley is a private trader and publisher of

Hard Right Edge

, a comprehensive resource for trader education, technical analysis, and short-term trading techniques. He is also the author of

The Daily Swing Trade

, a premium product from TheStreet.com that outlines his charts and analysis. Farley has also been featured in

Barron's

,

SmartMoney

,

Tech Week

,

Active Trader

,

MoneyCentral

,

Technical Investor

,

Bridge Trader

and

Online Investor

. He has written two books:

The Master Swing Trader

and

The Master Swing Trader Toolkit: The Market Survival Guide

, due out in April. Under no circumstances does the information in this column represent a recommendation to buy or sell stocks.

Farley appreciates your feedback;

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