Concerns for Stocks Continue to Mount Short-Term

UPDATE 2:00 p.m. EDT: The vast majority of our positions have some form of support relatively close to current prices. Therefore, based on our current cash and conservative asset allocations, as long as these levels hold, it makes sense to be patient. If these levels are violated, we will consider our options. These levels could be broken in the next few hours or the next few days, but as of this post they remain relevant.

While we believe the bull market remains intact and stocks will make higher highs later in 2011, we cannot assume that will be the case. It is important to remain defensive until we see evidence of a positive turn in risk assets. We are reviewing client accounts again today - we may move more money to the sidelines - please see the bottom of this nuclear post for more specifics related to possible strategy.

The chart below is an updated version of a chart presented on March 11. As of 12:20 p.m. EDT on Monday, the MACD bearish cross we have been concerned about has occurred. MACD red is above MACD black. However, this is a weekly chart – therefore the signal becomes more meaningful if the chart looks this way as of the close this Friday 03/18/2011.

Defensive Game Plan