Last week and this I've been implementing a strategy that attempts to find lower entry points on various CCC and DGI type stocks that don't seem too over-valued.
I've been buying vertical call spreads, both legs in the money, with the upper leg about 5% below the share price, to expire four to eight months in the future. These can be done for a small debit, about $3.75 for a five dollar spread, as a target when buying. If share prices stay where they are, or continue upward, they earn a small profit.
If prices head down, the positions offer the opportunity to buy the shares involved for somewhat less than the current market. It's like selling a put, but easier to manage if the things head south too fast for comfort. I plan to roll the lower legs down to keep them in the money, if and when share prices decrease. I have funds available for the purpose - I'm about 45% cash right now.
The companies involved: JNJ, ITW, MMM, VFC, SJM, CSCO and VZ. I've owned most of them in the past, with good results, and still remember the basics of past research and opinions. I plan to update my opinions as the time becomes available, or as they make moves that draw attention.
I think the current direction of the market is driven by the idea that while the cat's away the mice will play. Given the environment in Washington, regulators are likely to lay low, so as not to get in the way of an administration that is taking names and looking to count coup. Not really a sound reason to rally indefinitely.
The economy is doing well, unless somebody does something to throw it off the rails.
Disclosure: I am/we are long JNJ,ITW,MMM,VFC,VZ,CSCO,SJM.