I was watching one of the financial news networks last Wednesday morning. They had a handful of analysts on air. All of them were talking about how the current environment compared to the action in January.

You remember January? That’s when the market went parabolic.

Now that the S&P has broken above the January high, it’s reasonable to question if this action is a repeat.

Most of the analysts say it’s not. They say investor sentiment, which is a contrary indicator, is still too bearish (that’s bullish)… They say the economy is too strong. They say earnings growth – which is almost solely a result of the corporate tax cuts (yay!) – justifies the higher valuation.

Maybe it does. But I’m getting that sinking feeling in the pit of my stomach again. It’s the same feeling I had in mid-January – which kept me from telling folks to buy stocks. And from mid-January until the end of the month, the S&P 500 gained 100 points, or roughly 4%.

During that entire move, I told folks to be careful. The market was going parabolic. And while the move could produce fast gains for aggressive traders willing to risk riding the wave, most folks would be better off waiting for the wave to crash before putting more money to work on the long side.

You wouldn’t believe the emails I received back then.

It wasn’t as though I was telling folks to short the market. I was just simply saying that there would likely be a better time to buy stocks in the weeks ahead. And for aggressive traders, I did suggest a little short exposure and it was probably a worthwhile trade.

Of course, the parabolic move higher in January led to a complete reversal and a sharp move lower in early February. The S&P 500 gave back two months’ worth of gains in about two weeks.

I think we’re facing the same sort of setup today.

The S&P 500 made a new all-time high last week. It looks like it’s set to go parabolic. Folks are rushing to get long any stock at any price. And my email is heating up again with negative comments about being too conservative during a HUGE melt-up bull market move.

Folks… I am a conservative, contrarian-style trader. I don’t trade on momentum and I don’t chase stocks higher into overbought conditions.

If you are buying stocks today on the belief that the market has broken out and is headed higher over the intermediate term – I think you’re wrong. I think stocks will correct in the short and intermediate term and you’ll have a better opportunity to buy in a few weeks.

You can disagree. Heck, I might be wrong. But I know I won’t lose money sitting with a large cash position right now. And there are only a few sectors that look like good buys to me at this point.

So, when I say that I favor the downside by maybe a 60/40 perspective, I’m not saying to go whole hog on the short side. But a little short exposure makes sense – especially if you have a bunch of long positions.

Here’s the thing…

The momentum of the broad stock market is clearly bullish. The S&P 500 is trading above its 9-day exponential moving average. So, the momentum remains on the side of the bulls.

My argument is this condition is not likely to last – given the look of the Volatility Index and various other technical charts. But I’m not betting aggressively on a lower move until the market closes below its 9-day EMA.

I prefer holding cash, and looking to put it to work at lower levels in the stock market.

Best regards and good trading,

Jeff Clark

Reader Mailbag

Today, readers’ thoughts are on orchids and gold…

Like Gabriela’s quest to keep her orchids alive, both you and Doug Casey speak in terms of the next great gold rally any day! While I keep purchasing silver, not gold, I’m to the point where it’s getting harder for me to have faith in the next great gold rally! Carpe Diem!

– Bill

Jeff, I enjoy your columns. The dance was precious. It is easier to keep orchids alive than willing a gold stock rally. But I am with you; it will come.

Get your wife “Orchids 101” and she will do just fine.

Your recommendations paid for my lifetime subscription within three months. Keep up the good work and do not lose your faith in the golds.

– Gernot

Hi, Jeff. Man, what a great article! You are on a roll! Making me cry, making me laugh, drawing perfect parallels! Your missives are can’t-miss; keep doing whatever you’re doing!

Like you, I firmly believe gold investors will be vindicated one day, but our faith has definitely been tested over the years.

Thank you for your commitment to helping us even though you can be doing other things. I hope to meet you in person one day soon!

– Jesse

And another reader (among others) shared their best trick to keep an orchid thriving…

Waiting for gold stocks to rally here!

By the way, tell her to put one ice cube on the orchid once a week. That’s it! If it’s a bigger orchid plant, put two ice cubes on it once a week. That is the trick!

– Dave

Thank you, as always, for your kind and thoughtful insights. We look forward to reading them every day. Keep them coming right here.