Today’s stock market and its last hour major sell off proved that the stock market is indeed on very shaky footing, at least in the short run. The stock market was cruising along at all time highs today, when Dick Bove downgraded Wells Fargo to a “sell” rating and the market fell off a shelf in the final hour of trading. Granted, Dick Bove is a very well thought of financial analyst, but for any single call to cause a market movement of about 125 or 130 points in one hour is quite unusual.

An event like this should help the common investor to sit back and realize that there are going to be traders looking to take profits. After all we have run up more than 60% on the S&P 500 from the March lows, so some selling pressure should not be unexpected.

Corporate earnings have also been largely quite successful so far this quarter, but this kind of market has very high expectations and the first sniff of major disappointment could cause a sector, and eventually the whole market to tumble. You have to wonder right now if it wouldn’t be healthy for the market to take a pause and correct itself a little bit in the short run.

As an investor take a look at your portfolio. Are you comfortable with your investments over the long run no matter what the short-term may hold? If you are then you are probably fine just holding on, but if you’d like to protect short-term gains you might consider lightening up on certain stocks that have really moved substantially higher in the last 6 or 7 months. The longer term picture is unclear right now, but it is definitely improved from what it was just a few short months ago. The shorter term picture is that stocks seemed to be pricing in everything going just right, which could lead to disappointment in coming weeks and maybe even months.

It seems like this should be a given because of the horrific performance of the stock market indices over the past year and a half, but some still continue to let the last few weeks of gains cloud their view of the stock market. I strongly believe that the single biggest cause of the excessive optimism regarding the stock market’s performance is the financial news networks. Each of the last few days I have watched and heard them speak of how stock XYZ is up a “stunning 100%” in the past 3 weeks, only to fail to point out that despite that gain the stock is still down over 80% in the past year or two. Quite honestly, the major of investors who have held that stock during its tremendous fall probably aren’t horribly excited about the 100% gain in the last three weeks.

This isn’t to say that the recent gains aren’t a good sign overall, they may well be. I know I am certainly glad to see the 20% gain in most major indices. It is important to keep things in perspective and realize that while a little progress may have been made, the market and the economy have a long ways to go and the future is still very unclear.

The next time you turn on the television to listen to your favorite business news network remember to temper your optimism and hope for a long-term improvement in the economic picture. Don’t allow yourself to feel like you may have missed the train that is the stock market shooting straight up. The volatility will most certainly continue and the recent gains have not changed the fundamentals of the market as a whole. It’s fine to appreciate the stock market gains that occur, but don’t let them skew your overall investment plans or make you feel as if you are missing out on the rally of a lifetime.