For the past month, I’ve been writing on this blog how I moved my clients to 90-100% cash at the beginning of the year. The number one email question I’ve received is: “When do you get back in?” Before I answer the question, there are a few points I would like to make:

1) This blog is not investment advice. Please don’t follow anyone blindly (including myself). You should know your timeframe, risk tolerance, investment style, and have some financial objectives. If you don’t have a plan, I suggest you get one!

2) My concern is not when to get back in. My concern is to avoid further potential downside. I’m not thinking about offense, I’m thinking about defense. I have studied the best traders in the world and they all preach defense and cutting your losses.

3) I have no problem making decisions. I’m not worried that I’ll sit out for an extended period of time and miss the next rally. When market conditions improve, I am confident that I will identify the best fundamentally and technically sound stocks, and trade them as effectively as possible.

Now to answer the question. What I need to see is the major indexes get back above their 50-day moving averages, accumulation in the form of institutional buying, and sentiment to turn extremely bearish. Finally, and most importantly, we need to see strong fundamental companies with solid earnings and sales growth build sound technical bases.

For all this to happen, it will take some time. The truly patient and disciplined traders will be rewarded when this correction is over, but people who force trades will continue to get frustrated and hurt their confidence. In the meantime, I suggest keeping your positions light as I continue to expect more volatility. Again, know your timeframe, stick to your investment plan, and stay defensive until conditions improve.

I can be reached at:

Follow me on Twitter @jfahmy
Follow me on StockTwits @jfahmy