A worse case scenario in my books would be 8200 on the Dow.

These numbers I picked out of the air or read in a teacup somewhere. The point I like to make is that there is an Accumulation Zone and a Distribution Zone we should be aware of, rather than a cycle top/bottom some of us try to pinpoint.

If we move out of stocks and go to cash (or counter-cyclical stocks) during a Distribution Zone, and do the opposite during the Accumulation Zone, then over the years we will beat the market indexes and sleep better at night.

What to do when the market gets there is rather easy for me, given that I have a watch list of 100 quality stocks to focus on.

Apparently there has been a Distribution Zone above (a very round number) Dow 11,000 or Dow 11,500, and there may be an Accumulation Zone below Dow 9,000 or Dow 8,300.

During the Distribution Zone, I simply write call options to earn premium (which lowers my cost base) or allow the market to call away my stock during the excessively bullish days late in a bull market.

During the Accumulation Zone, on the other hand, I write put options and earn the premium or have the stock (the ones I want back into my portfolio) put to me at excessively low prices.

Some stocks go into a Distribution and Accumulation Zone before the majority of others. Intel (INTC) is one. As long-time readers know, and the archives show, I no longer wanted INTC in my portfolio above 25, even though the company stayed in the Cara 100, and now I'd like it back under 18. So I got out early and am getting back in early " compared to the cycles of the majority of stocks.

Have I made the right decision? With the option overwriting and the drop in market price, it is easy to see how INTC was just another decision in the long journey of capital markets trading that helps me beat 25 pct annual total returns (gains and dividends and premium income).

Do I like to buy calls or puts? Not really because of the concept of time decay. Time always works against you when you go long puts and calls.

I do it, on occasion, but at those times I say the devil made me do it, not common sense.

If the market is in decline, there will almost always be some stocks that move counter-cyclically. Maybe they don't go up so fast as others in a broad bull market, but they do move up. And on occasion there are foreign markets that present buying opportunities when local markets are bearish.

But normally I just think it's better to sit on cash or do short-term speculative trades where the homework has been done.

Buying puts or shorting stock in a market in decline, like I believe is the case today, can be dangerous. There can be take-over bids and mergers that blow up your capital, so you have to be extra cautious. Properly timed, buying puts on the Nasdaq index to hedge the losses you presume will happen in individual tech stocks you want to continue holding, for instance, is done by some capital managers, and that would be the best course of action for most traders I guess.

I try not to think of the market in terms of bull or bear, but more like a dance. Sometime you want your dance partner to lead and other times its best if you take the lead. The one big difference I try to stress here is that you ought to be carefully choosing your dance partner. Some of them can be downright nasty.

Also it is a quirk of human nature to want to be overly aggressive at times. Like the old bull knows its best not to run up to the herd and tire itself out, it takes its time and gets them all " as the joke goes.

The owners of capital who are not performance-bound managers, and who have no debts against their positions, can take all the time they want. That's quite an advantage over the others. So you should use this advantage.

Time is the most important concept in trading. I am not a particularly religious person but I live by Ecclesiastes 3. There is always a good time to take a step forward and another good time to step back. Like I say; the market, as in life itself, is a dance; a continuous dance " not a timed event.

Within this motion, sometimes prices move fast and sometimes slow; and sometimes up and sometimes down.

I don't feel the need to try to force it. I don't need to leverage myself.

When the broad market gets to the bottom, it will get there when it gets there. And when you start seeing Relative Strength Index technical indicators falling to the 30-line for the Monthly, Weekly and Daily for the good quality stocks " the ones you'd like to own over a ten year time horizon, then you scale in. And when you see the same RSI above the 70-line for the Monthly, Weekly and Daily, then you scale out.

And if Mr. Market tries to go very fast from one to the other i.e., in a spike top or bottom, you simply forget the Monthly data calculations of RSI and focus on the Weekly and Daily. All you are trying to do is make 25 pct total returns per year. If you can beat that number over 10, 20, 30 or more years, you will be Warren Buffett-successful. Very very few are " no matter how much advice, insider knowledge or computer support.

So all I can do is to continue to teach these methods. I know there are readers who would like me to pick tops and bottoms, and I try on occasion just for fun, but the truth is nobody can do it successfully all the time.

Just think about a Dow 8800 bottom versus a Dow 8000 or 7000 etc. Do we know if there is going to be another 9/11 or whatever? There are too many unknown events that will happen in our future that will cause price motion to change beyond anybody's ability to accurately forecast it.

So my story is that there is just an Accumulation Zone and a Distribution Zone and I'm sticking to it.

Where to, this broad market? I don't know other than to say I believe we are on the journey between Distribution and Accumulation, and I'm confident we'll know when we get there.