Another week of volatility, but with no real resolution to the burning question of “where do we go next?”

Is this a continuation of the broadening topping process that began 15 months ago? Or, are the markets setting up the next bullish advance to all-time highs?

Unfortunately, while we can all speculate, the reality is that we will not know for certain until a decision has been made. As such, this is why I have kept long-term investment models conservatively allocated up to this point and still maintain a 50%+ exposure to cash.

The reasoning is simple. If the markets re-establish the bullish trend, I can rotate from the safety of “cash” back into equity-based risk. However, and unfortunately for those individuals that continually tout “buy and hold” investing, if the market breaks to the downside the next bull market rally will be primarily used making up previous losses.

This is an important concept to understand. Historically speaking, when markets have a combination of high valuations and declining earnings, outcomes have been less than favorable. Yes, eventually the markets, and subsequently investors, did get “back to even.” However, as shown in the chart below, the markets make new highs roughly about 5% of the time. The other 95% of the time the markets are making up previous losses.

“Getting back to even is not a long-term investment strategy.”

….read and view larger charts HERE

….read and view larger charts HERE

…a must view from Michael Campbell: People Choose Free Candy Bar Over $150 US in Silver