Investors should be double checking the level of risk exposure in their portfolios to determine if it makes sense given the current environment. Lately I have been making sure my entry points are precise and my allocations make sense. So far that has served me well and I know I own all the leaders. But when I look around at the rest of the market, I can’t help but feel like I might be over invested. It’s true the major indices have been grinding into new high ground, but it seems they have been doing so begrudgingly. The market feels fragile and volatile as each of the last 6 up days on the S&P 500 was followed immediately by a down day. At the end of today, the distribution day count will reach 5 for both the NASDAQ and the S&P 500.

Usually I say that when selling stocks, you should judge each stock on its own merit and try to hold on to good positions. But proper portfolio management forces you to recognize the effect the general market has on even the best stocks. I’m not necessarily talking about selling off entire positions. But rather, trimming back the total percent invested so that I’m in line with strength of the current environment. In doing so, I’m looking ahead and preparing myself for what could possible develop over the next few weeks. As we approach earnings season once again, I want to be positioned in such a way so that I can easily navigate either positive or negative reactions that may occur. As always, if your operations are working, then more power to you.

Best Returns,

Scott O’Neil

President, MarketSmith Incorporated

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