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After two Fed rate cuts, and a spirited month-long market rally, I think it's a good time to re-assess my portfolio, and the market in general...

The price action, in most cases, has been very impressive, but there are some signs of wear and tear. The VIX, a volatility measure that I watch very closely, has been cut in half from the near-panic levels of mid-August, and is well below its 10-day moving average. Several individual stock charts look dangerously over-extended to me. And earnings season is just 2-3 weeks away.

With that in mind, over the past few days I've harvested some profits on two of my favorite long positions: CF Industries (NYSE:CF) and Research in Motion (RIMM). Both stocks have bounced around 60% from their mid-August lows, and I'm content to reduce my exposures there.

I've also added some new shorts, particularly in the consumer/retail area (CPKI and DDS), where I think the current economic slowdown puts their earnings outlooks in danger.

Over the next few weeks, it's conceivable that we could print new 52-week highs in the market indices. However, individual stock price action could get sloppy and increasingly jittery.

Right now, in a longer-term sense, I'm inclined to add to my long exposure on any pronounced near-term weakness. In the back of my mind, though, I suspect that we may be forming a significant broadening top for the overall market. An eventual return to the August lows, or even lower, cannot be ruled out.

Source: Time To Take Some Chips Off the Table