The stock market has reached extreme overbought levels, similar to 2000 and 2007. Nevertheless, in the short-term it’s possible the market can get even more overbought. In my opinion, the smartest move right now is to be almost all in cash and wait for the signal to buy puts or inverse ETFs (only the most experienced should short stocks, and stay away from leveraged ETFs). What are the signals? Examples: An intraday reversal, a sudden plunge in the indexes, or intense selling on strong volume. This market is extremely vulnerable so caution is strongly advised. Cash is your friend right now.
MY BOOKS: The best selling Understanding Options 2E (McGraw-Hill), Understanding Stocks 2E (McGraw-Hill), Start Day Trading Now (Adams Media), and Predict the Next Bull or Bear Market and Win (Adams Media): http://bit.ly/1bl0ZNk