David Sterman

Just as a rising tide can lift all boats, a falling tide can also sink them.

As I've been writing for the past few months, investors should be thinking about opportunities for profit-taking after the market made a virtually uninterrupted upward move since October, 2011. I was poorly-positioned for that rally in my $100,000 Real-Money Portfolio, focusing on stocks that were built for the long haul. Instead, the market has rewarded investors that aimed for the riskiest corners of the market.

Not anymore.

Since hitting a peak of 1,416 back on March 26, the S&P 500 has slipped by about 4%, though many individual stocks are off 20% or more in recent weeks. Some of these laggards were only recently added to my portfolio, and as I think they are poised for much better days ahead, I'm not looking to sell them when the markets get rough.

But I do want to have cash to play with, now that many more bargains are emerging. And I'm making a pair of moves that should free up more than $15,000.

For starters, I am selling my 600 share position in the Direxion Small Cap Bear 3X Shares (NYSE: TZA), unlocking more than $12,000. This exchange-traded fund (ETF) is rallying as the market slumps, and I run the risk of getting out too soon if the market tumbles from here. It's the price I'll pay to build a cash war chest.


David Sterman

David Sterman has worked as an investment analyst for nearly two decades. He is currently an analyst for StreetAuthority.com