When I take into account the recent 4% drop in the averages, color me more bullish. But always color me "permanently flexible." The key to assessing the short-term investment mosaic remains a quilt consisting of psychology, fundamentals and, perhaps most importantly, in figuring out when the market has fully discounted what most now know -- namely, that the domestic economy is in recession and corporate profit growth expectations remain too optimistic. From my perch, we are moving closer to (or at the stage of) a tradable rally. Nevertheless, I suspect the rally will be contained to something less than a 5% advance as I remain of the view that the intermediate-term headwinds have mounted and will provide challenges for corporate managers and investment managers in navigating the economy and the markets. Pick stocks, not markets. And, above all, keep investing/trading positions at below-average levels, err on the side of conservatism and remember some of these 12 principles of investing. Doug Kass writes daily for RealMoney Silver, a premium service from TheStreet.com. For a free trial to RealMoney Silver and exclusive access to Mr. Kass' daily trading diary, click here.