The indices have been stuck in a 1% band for 12 days.  Q2 earnings reports are lukewarm.  P/E for the whole market is way too high.  The Fed kicked the can again.



It just feels like once everyone gets back from vacation and there's the slightest tremor, the whole thing is going to break loose and drop for a while.  I'm considering setting a stop loss order on the big chunk of SDY in my retirement account, and maybe some of the bigger positions in my brokerage account.  I'm thinking 5% below current prices, and figure if it drops that much it means we're on the downward slope for a bit.



Advice? Comments?  Anyone else think it's time to start playing defensively?

I have a stop loss order on my junk bond fund.

I have sold calls on some of my other holdings.

I am getting very mildly defensive.  But, with an election coming up in November,  I am afraid some body might get elected.

You can only lose money if you sell.   Just look at a big drop as stocks are going on sale and buy low.   Now if you are retiring in a few years your strategy may be different but then again you should be mostly in bonds of that is the case.

I am curious as to if it would be better to pull the trigger early and sit on cash, or keep holdings and then average in, in the case of a big drop?

It depends.  If an investor is young, I would recommend to keep holding, and, as you  say, average in, in case of a big drop.

Pull the trigger early and sit on cash?  Well, cash is trash, as they say.  If your crystal ball is 100%, maybe this will work.  Mine is not 100%.

You could sell calls, I have done so, slightly.  You could buy puts, but puts are a wasting asset, see above reference to percentage of crystal ball infallibility.

In normal times, you could buy a chunk of long term treasurys, but these are not normal times.

My plan?  Keep some powder dry, but don't go crazy.  If the markets crash, buy XIV.

I also have a small exposure to gold and bitcoin.

I set stops at 3% below the lowest price in the last two weeks.  I adjust my stops up when this increases to 'lock'  profit.