Hedging for a Market Top or Market Breakout

Although I am happy and benefit from the recent stock market rally, I am also becoming more concerned about a major correction.   The recent gains, particularly in my company stock, have increased our retirement savings to the peak levels achieved in late 2007, when I took early retirement.  However, the question now is whether the 2007 values will represent a market top, from which correction will occur.  Or whether the current market will break through to higher levels. . 

After the significant losses in 2008 to 2009, I am still not yet confident enough to put the majority of our retirement savings back into equity and bond investments.  Given the issues with EU sovereign debt (which the press seems to  ignore nowadays),  the U.S. debt crisis (which Congress and the President seem to ignore), and QE infinity by the Fed,  I still believe that major correction is a high risk. 

So we continue to keep about 3-5 years of living expenses in cash or cash equivalents, execute company stock options as the market rises (or near expiration), and trickling in some money into stocks, while selling some stocks to lock in gains.  If the stock market continues to rise, the retirement accounts will partially benefit.  If the stock market falls, our retirement savings will  be partially protected.

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This is not financial or retirement advice. Please consult a professional advisor.

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