I can't escape this feeling that a sea change is coming in the stock market. It's fair to say that institutional investors are uneasy about the current environment.

Interest rates are rising. The price of oil is high. The price of heating oil and gasoline is high. The price of natural gas is high. The prices of most precious metals are high... and now, almost\ in a stealthy fashion, the price of gold is moving up substantially. In my mind, the price of gold is an important leading indicator regarding investor sentiment and the state of the economy. When the price of gold goes up, we need to worry (unless, of course, we've been following Michael's advice and investing in the metal).

What I'm trying to say is that investment risk is rising. It seems as though it's becoming riskier to be an equity investor each day. That's why it is so important to take a second look at your portfolio right now. If you are a stock market speculator in small- and mid-cap companies, your portfolio has to be lean and mean. It's time to weed out anything that's not performing.

Hold on to only your best stocks. Cut your losers. Build up your cash reserves. As an investment class, cash is becoming more and more desirable. I'm convinced that investment risk is rising across the board. As such, there is nothing wrong with holding more cash in a money market account.

The current commodity price cycle has a long way to go. When commodity prices are strong, the broader stock market tends to not do so well. Therefore, you need to be extra selective when considering new equity positions.

If I had to initiate new speculative positions right now, I'd pick stocks that are experiencing solid price momentum (with strict stop-loss limits). These are stocks that have already gone up in price. I'd rather try to ride an existing upward trend than wait for the market to "discover" an underappreciated stock in this environment. The broader market is stuck in the doldrums right now, and I don't know when it's going to get out of this state.