Mostly in Cash

We are officially over the half way hump for 2009. Things appeared pretty grim early on as the US economy suffered a major heart attack from the unraveling of several different bubbles. Investors everywhere were skirmish and afraid to take any risk. Main Street folks didn't exactly know what was going on apart from the constant media headlines, except they knew that their net worth had significantly shrunk. But, then came April's stock market rally. The bed-ridden patient was suddenly able to slowly walk again. A couple more months of training and he's off to running 5K's.

That brings us to the present day. I was actively trading early on in the we-are-not-going-to-have-a-depression rally and was cautiously optimistic for a recovery in the very latter half of the year. Now, I'm not so certain. The stock market supposedly prices in future events and the current rally has sure priced in a picture perfect recovery, which I don't think will be the case. My concern centers around the unemployed (including the part-timers wanting full-time positions), the dented personal balance sheets, the cautious business owners, and a hobbled consumer sentiment. These are major headaches for anything more than a bounce-and-reset staircase type of pattern. It's not going to be pretty.

I expect a back-to-the-bad reality market anytime now. It may not happen until after the summer season, but I am now almost certain it will come before the year end. We've run the markets up so far in such a short period (albeit from ugly levels) that we will need a dose of reality soon. The correction may be fast and furious (not enough backfilling creates gaps without support. ). Or it may be one of those that just drags on and on...well, you know how it is since this current rally is of that sort.

Recently, i have closed out positions in FWLT, NUE, C, EMC, MFE, YHOO, ESC, DAL, PRXL, HBC, X, IP, MCD, KO, WFT, SNE, RIO, COG. Most of these were swing positions held over the course of several weeks. I currently have little confidence in any particular sector. Suffice it to say, I am now holding 70% cash and sitting patiently waiting for the next blip.