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This blog post originally appeared on RealMoney Silver on Feb. 14 at 7:36 a.m. EST.

On Monday morning, I turned more


about the equity markets, thinking that a 3% to 5% rally (within a bear market) was imminent.

This week's orderly advance of nearly 3% has us very quickly in the shooting range of my expectation, and equities now stand about 8% above the


market bottom.

I expect, as we move to the top of a trading range, renewed optimism (e.g.,

Jim "El Capitan" Cramer

) to percolate a bit and for stocks to leave oversold levels as a larger percentage of investors and traders seem too often to worship at the altar of momentum. Some might even confidently predict a new bull market leg, an assertion I would oppose.

Having said that, this rally remains an excellent opportunity to cull the losing positions and raise cash levels after an abysmal several months.

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S&P 500

is now down by 6.8% year to date and my


of a 5% to 10% decline for 2008 remains intact. But, between here and year-end, it is still likely to be a roller-coaster ride, with many opportunities on both the long and short sides. Having above-average cash positions is a necessary reagent to capitalizing on continued volatility.

Overnight, there was



on what I believe to be the next shoe to drop -- the auction rate preferred market:

From my perch, the safest anti-implosion investment and best risk/reward trade remains being short bonds. I am playing this trade via the

iShares Lehman 20+ Year Treasury Bond Fund

(TLT) - Get Free Report

. Tactically, I plan to expand my short book into further strength.

Doug Kass is the author of The Edge, a blog on RealMoney Silver that features real-time shorting opportunities on the market.

At the time of publication, Kass and/or his funds were short the iShares Lehman 20+ Year Treasury Bond, although holdings can change at any time.

Doug Kass is founder and president of Seabreeze Partners Management, Inc., and the general partner and investment manager of Seabreeze Partners Short LP and Seabreeze Partners Short Offshore Fund, Ltd.