Odds of Stock Pullback Increasing

With the S&P 500 up seven points on Thursday, numerous signs are emerging that point to increasing odds of some corrective action in stocks:

  1. Short-term charts are overbought.
  2. The VIX is attracting some interest.
  3. All four CCM Market Models have hit “Tired Bull” levels.
  4. Utilities and healthcare are attracting interest.
  5. Since the November low, the S&P 500 has tacked on over 150 points.

We started buying on November 19 - we have been locking in gains over the last three sessions. The market can quickly erase gains that have taken months to accrue. If we convert the gains to cash, they can not be taken away by the market. Thus, with profits booked we are in better control relative to our next moves. If the market corrects, we can redeploy our profits at lower levels. If the market begins behaving in a more favorable manner, we can always buy back in when the risk-reward ratio is more favorable.

Could stocks continue to march higher in a straight line? Absolutely, positively yes, but it is not likely. We are not calling a top; just trying to invest prudently and protect our gains.