Take Five, We Need a Reality Check

I want you to sit back, clear your mind, and reflect on where we are, how we got here, and what keeps us going. Then, I want you to play the following media montage in your mind.

The montage starts with negative earnings and poor outlooks from companies across every sector, jobless claims and unemployment rates rising, housing markets in free fall, new home sales down affecting thousands of builders, sub-prime mortgage crisis, accelerating foreclosures, a dollar that is in free fall while the fed pumps never ending streams of money into the economy, growing trade deficits hindering our ability to compete, oil hitting all time highs, gas prices that make me wish I had bought the hybrid version of the Toyota Highlander instead of the normally aspirated V6 (sweet ride). The jump in gas prices have raised the cost of transportation, which in turn inflates the cost of virtually every product on the store shelves.

Is that a clear enough image for you?

Yet through all this AAPL and the markets want to go higher, depressing story after story is shrugged off by the market. And the irony is that we're at the cusp of an inverse head and shoulders breakout, one of the most reliable Bull patterns.

It's gotta make you pause. Can we do it? Or are we just another bad news story away from a complete reversal and market colapse? This is our reality. A classic struggle between the Bulls and Bears, cold steel rain and green fields, good vs evil, coke or pepsi, uh, err...

Anyway, I just wanted to illustrate that in order for us to navigate this market, and making money, we need to keep things in perspective. Don't let a little run-up cloud your vision and affect your judgement. I've said it before in several recent posts, I'll say it again so that it's clear and unambiguous; our NUMBER ONE priority is CAPITAL PRESERVATION; our number two objective is making a decent return.

So, you have to respect where we've been, how we got here, and what the challenges are ahead of us. It is tenuous, but we must rely on our good senses, experience and willingness to accept the truth. Therefore, this situation requires that we stay mainly in cash, let the Bulls and Bears fight the good fight, and when they're done, they will have illuminated the path that we should take.

Enough said.
-zach bass