It’s hard not to be optimistic about a stock market that is trading within a few points of all-time highs.

You get that sense that everything is going to continue to strengthen indefinitely because there has been such a positive short-term catalyst from the election. When coupled with the overwhelming cash on the sidelines and new money pumped into bond funds that are now underperforming, you get the sense that stocks could keep running for quite some time. The truth is that they can. 

The picture right now is quite bullish from a technical standpoint. Markets are above all-important trend lines, volume has been picking up, and price tells the ultimate story.

Fundamentalists can always argue both sides of the picture. Balance sheet statistics and economic indicators are subject to interpretation by whatever narrative fits your outlook. You can find rays of sunshine or clouds on the horizon depending on how you look at the data.

I find myself leaning towards the bullish camp, but have not made any recent adjustments to my equity exposure for clients. We are still holding a modest degree of diversified stock ETFs that are overweight value as opposed to growth. This provides us with correlation to the market because anyone with an ounce of common sense knows that there is no way to predict the future.

I am a strong advocate for never trying to call tops and bottoms. The market graveyard is littered with the corpses of managers who try to stake a reputation on those methods. However, I think there are obvious areas when you can have a sense of caution when putting new money to work. Certainly, all-time highs fall into that category.

Now this rule mostly applies for investors that are making strategic asset allocation shifts with static accounts. Those who are steadily contributing to retirement accounts or stalking individual stocks should adhere to a different playbook.

It’s easy to become sucked into a “fear of missing out” mentality or even pressing harder into longs that are working in your favor (greed). I would much rather see investors take a counter-intuitive approach by patiently waiting for a pullback rather than plunging headlong into new highs. Cash on the sidelines is often silently begging for attention. It takes a strong will to ignore impulsive urges when the risk symmetry is skewed against you.

The investors at greatest risk of experiencing this psychological pull are the ones who have been left out of the rally altogether. Those who have let fear or conviction override a sensible investment approach. You’ve been given at least three meaningful dips this year. January, June, and October were opportunities to put money to work. What did you do then?

Conversely, those who have participated in the rally should avoid becoming overly confident about short-term gains. Keeping a balanced mindset and realizing that markets ebb and flow should be top of mind at this juncture. The most successful investors I know don’t become overly emotional about winning and losing streaks. They simply adhere to a disciplined game plan and execute it with little fanfare.

Summation: You can be bullish with existing longs and cautious with new ones.

Always remember to stay humble, or the markets will do it for you.