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It's Time to Take Money Off the Table: Here's Where to Begin

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Sell trading positions, buy long-dated out-of-the-money puts, or move into "safer" dividend plays.

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It's a good time to be selling trading positions, buying long-dated out-of-the-money puts, or moving into "safer" dividend plays which can do ok in corrections, as other investors gravitate toward them. I've recently suggested Philip Morris (NYSE:PM), McDonald's (NYSE:MCD), and Coca-Cola (NYSE:KO). I'll offer buy limits and more details on these three stocks in a second. But first let's look at the big picture, and why the market is about to retreat.

* Insiders are turning bearish. As the market has moved higher, insiders have stepped up their selling, especially in relation to how much they are buying. This is not a good sign. Two insider sentiment indicators tracked by Vickers Weekly Insider, published by Argus Research, have turned the most bearish they have been since early May, when the last correction got underway.

* Investors are turning much more bullish. Painchaud has his own proprietary measures that show this trend, which he does not share. But we can also see this in investor sentiment surveys published by American Association of Individual Investors and Investors Intelligence, and in the declining put-call ratio. Plus, short interest in stocks is currently near the low end of its multi-year range, according to Bespoke Investment Group. Technical indicators like overbought-oversold measures, the number of stocks making new highs compared to those making new lows and price, and the advance-decline line support the view that the market looks toppy, says Painchaud, at Market Profile Theorems.
No positions in stocks mentioned.

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