NEW YORK ( Options Trading Signals) -- Investors who purchased stocks, gold or silver, and bonds anytime in 2009 were handsomely rewarded in 2010 if they held their positions.How long will these assets continue to perform well? How long can gold pump out double-digit returns before suffering a bad year? How high can stocks climb when uncertainty surrounds the market? Price action is never wrong, but history reminds us that a particular asset class does not outperform all other asset classes consistently over long periods of time. Trees do not grow to the sky. Since 2009, stocks, precious metals, and bonds have all had tremendous performance records. Most economists point to actions by the Federal Reserve as the primary reason. The central bank's interventions lowered interest rates to extremely low levels, which caused investors to take more risk for better returns. High levels of liquidity paired with low interest rates moved nearly every asset class higher, with stocks and precious metals earning outstanding year-over-year returns. With 2011 just starting, will stocks, bonds, and precious metals continue rallying? When looking at probabilities and statistics the odds are not favorable that all three asset classes will remain outstanding investments. In fact, it is possible and arguably likely that at least one of the asset classes -- if not more than one -- will face headwinds in 2011 and beyond. Although Tuesday was only the second day of 2011, precious metals are under significant pressure, and the fundamental picture for bonds and stocks is uncertain.
S&P 500The stock market is overbought currently on nearly every time frame. Some pundits are calling for another outstanding year while others believe a correction is likely to unfold. What I am certain of is that caution is called for right now. I would not be afraid to take profits and adjust stops to protect my trading and investment capital at these levels. Risk seems excruciatingly high, and when we look at a longer-term chart of the S&P 500 it is rather easy to surmise that a pullback may take place.
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