Market Euphoria as of 11-4-10

This has been a wild week in the markets, first the elections, then Ben Bernanke's QE2 announcement. If you are a longer term investor and you have your portfolio diversified in good quality stocks, and shorter term bonds,  some commodities, maybe some real estate - you had a very rewarding week. I am writing this just before the employment figures get released tomorrow at 8:30 so things could of course change.
If you are a fairly active trader, you may have had a fairly confusing and frustrating week. The markets moved drastically, especially on Wednesday after the Fed announcement. Today, all you had to do was throw darts at the wall and you made money.

So now what?
There is market momentum that is hard to short right now. This could go on for a while with stocks and commodities moving higher.  However, as noted in previous remarks, the average investor is now stepping back into the market, a move which usually signals we are nearing a Top.

Short Term players - I  would consider taking some money off the table, tightening stops ( I do hope everyone uses Stop Loss transactions just in case), and starting to hedge positions. The market has had a terrific run these past 2 months and now is not the time to be greedy. Putting some money in safer investments does not mean we think the market is going to go down. It is a safety move because nasty events have a habit of appearing suddenly and causing drastic moves in the market. No such moves are expected right now, investors are turning euphoric meaning they think the markets will go straight up into next year. That always makes me cautious.  What I suggest doing in markets such as this is Dollar Cost Average Out  ie start withdrawing money from stocks into safer investments on a schedule, and putting in tighter Stop Loss orders. Bonds - keep them short duration.

Long Term investors and 401k participants - I would review investment allocations to ensure equity investments are in Large Cap funds that hold a lot of dividend paying stocks. Bonds should be in shorter duration fund options. Money Market holdings should be increased to "take some profits off the table". New contributions should be going into safer investments rather than being invested in Stock funds at these high valuations - wait for a pull back before allocating these contributions into stock funds.