Interest rates remain at multi year lows with most money market accounts offering less than one percent. However, for the trader, the safety of moving to cash is infinitely more valuable than whatever nominal return you could get on the money. As traders, we often fall prey to the temptation of always being involved with the markets, but there are times when raising cash is the smarter strategy. Of course, much of this depends on what type of trader you are. For a Daytrader, this may mean scaling back positions during the lunch hour, or low volume days. It doesn’t make sense to take big risks when the environment is unclear.

The best traders simply accept what the market offers. The minute you try to take instead of receive, is when the market will teach you a lesson. The reason I mention this is that I think we are at a spot where it is more important to protect capital rather than aggressively chasing gains. I mentioned earlier this week that the markets are sending mixed signals, and one day after breaking above important resistance levels, the markets promptly gave back a week’s worth of gains. While there is nothing mixed about that, the markets did find support again today and have yet to really break. However, the markets should have rallied after clearing their bases in April, and here we are in June still moving sideways.

The stock market has been pretty easy for almost two years (buy the dip, don’t short), and it wouldn’t surprise me if the low volume summer months are more difficult this year. Below is a long term chart I use to track the relationship between bonds, commodities, and stocks ($SPX,$TNX,$CRB). I use moving averages to smooth out the data, so it is more of a reference than a timing device. Bonds have certainly been moving lower which may weigh on stocks, but $TNX is also in a multi decade downtrend, and has decoupled before. However, once again it is a mixed signal. Stocks and Commodities remain trending higher, which makes taking an outright bearish posture dangerous.

The bottom line is that as a swing trader, it doesn’t make sense for me to get aggressive here. I still have some open positions, but to say I have been aggressive in taking profits is an understatement. I am taking the money out every chance I get and only re deploying for trades which have a well defined risk. The market will always be there and it is much easier to recover from missing a bounce than from being heavily positioned during a panic for the exit.

Give me the zero percent, it’s better than losing it.

Joey