For the first time since the tariff sell-off last year, the S&P 500 has closed below its 200-day moving average.

We’ve talked about how important this is in “The Magic of Moving Averages.” For months, there has been no reason to be fully invested. Reducing risk and holding cash has been the priority. Now, that matters more than ever.

Think of the 200-day line like the market’s “health check.” When the S&P 500 is above it, things are usually fine. But when it drops below, something shifts. It’s like the market saying something might be off. And it’s important to listen.

The reason is simple: most major corrections have happened below this level. It doesn’t matter if you look back a few years or a few decades. The same pattern shows up again and again.

Of course, sometimes the market dips below it and quickly moves back up. But the truth is, we never know what will happen next. But being cautious is now more important than ever.

It’s not just the S&P 500. The Nasdaq has also closed below its 200-day moving average. Only the Russell 2000 and some small caps are holding up okay, at least for now.

That’s why it makes sense to be more defensive right now, and why holding cash matters so much. Cash is not doing nothing. Cash gives you flexibility. It gives you the ability to wait, protect your capital, and be ready when conditions improve.

Good investing is not just about making money when things are easy. It is also about knowing when to slow down, reduce exposure, and protect yourself when the market environment gets worse.

This is less about perfect timing and more about protecting your financial and mental capital. And right now it matters more, because this is the first time the level has broken in a while. Maybe it’s just temporary and the market bounces back like nothing happened. But the odds of a deeper correction have clearly gone up. That should not be taken lightly.

The best thing to do now is to stay very attentive to your portfolio. This is not a reason to sell everything. It’s fine to hold on to long-term positions. But the number 1 priority is to be stricter with cutting losses, reducing weak positions, and increasing cash. Hence, that’s what I’ll continue to do now and going forward to adjust the portfolio accordingly. You cannot time it perfectly, and that is not the goal. But the market is telling you what to do. You just have to listen.

Don’t fall into the trap of waiting for a losing position to bounce back just so you can get out at breakeven. That rarely works. And most of the time, it just makes the loss bigger.

Of course, if you’re more advancing you can add some hedges too. But for most people simply having a large cash pillow will save you a lot of frustration and capital.

Risk management is everything, especially when the market is becoming more hostile.

There will be incredible opportunities coming out of this correction. But that day is likely not today. There is no reason to rush. This can go on for weeks, months, and in rare cases even years.