INVESTING: Market’s in decent shape, so don’t be too cautious

I love summer. Especially June, when you know you have months of great weather left. Of course, there always are people who complain. There is always the possibility of a few bad storms now and again, but with a slight perspective on the calendar, you know how much time you have left before the cold.

Too bad the stock market is not like the seasons. But in a way, it can be looked at from a weatherman’s perspective. His record in the near term isn’t so great, but he’s dead on by telling you that six months from now it is going to be a lot warmer than it is today.

Obviously, though, if he said we were going to have six straight months of low 80s and mostly sunny skies, we wouldn’t believe him (unless we were in Jamaica). Well, here is another parallel with the stock market-we could be in pretty fine shape for the next four to six months. But when I say this to people, they just don’t believe me.

Since late September, I have been sticking with the same message-that prices should head higher and investors should buy the dips. Same message today. But I am getting resistance on this message now. People are reading the stats of a record number of consecutive positive months and a record number of years without a 10-percent correction.

Those warning signs are real and speak to the reason why you don’t want to be leveraged at this point. But if the market were to drop 3 percent to 5 percent in the next few weeks (which could easily happen), a lot of investors would begin to think the next bear market was kicking off. However, that would be the time to increase your aggressive stance.

I realize that the market has, for the most part, lost some of the momentum it had in September and October. Technology stocks have been consolidating for more than three months, and new highs are seen in the rest of the market in fits and starts.

But viewed from an in-depth internal perspective, almost every indicator has been confirming the new highs in the price indexes. One example is that recently the Dow Jones industrials, transportation and utility averages all hit all-time highs on the same day. This market may not be in a moonshot right now, but it is firing on all cylinders.

Now that we are confident the market will be in decent shape for the next few months, and quite possibly a lot longer, we get down to how to maximize the current situation.

I still get a lot of questions about the foreign markets that did so well in 2006. I think the U.S. market will post the best performance this year, with tech stocks leading the way. But I also am long on the Australian market, and even though India seems stuck in a trading range, it is a buy when it gets to the bottom of the range (near $40 for the exchange-traded fund IFN).

I would stay away from energy and housing stocks and look to take profits on anything that gets extended to the upside, like real estate stocks, with the idea of buying it back when it falls.

The stock market is a place where caution and skepticism generally pay off. In the present case, though, it might be more profitable to throw a little caution to the wind.