In the battle between the bulls and bears, the bears are making some excellent arguments.

The market’s price-to-earnings ratio is above its historical average. The cyclically adjusted price-to-earnings ratio (also known as CAPE) is reaching highs not seen since the 2008 financial crisis.

#-ad_banner-#The bears argue that the bull market has gone on far too long and that we’re reaching the peak of the business cycle. But one of the most compelling cases from a technical standpoint is the ”Dow Theory” divergence.

According to ”Dow Theory,” developed by Charles Dow in the late 1800s, we should see both the Dow Jones Industrial Average and the Dow Jones Transportation Average in uptrends during a bull market.

That makes sense, because transportation companies ship what the industrials produce, and strength in both sectors is consistent with a growing economy. But the transports have been weak since the beginning of the year, failing to confirm new highs in the industrials.

In the chart below, you can see that these two indices typically trade in tandem, but recently transportation stocks have begun to stray.
 

This bearish signal has many investors sitting on the sidelines. They believe the market is too risky and are terrified of another 2008-like crash.

Now, first let me say that I understand the fears that some investors may have. But I also believe there’s plenty of opportunity left in the market if you have the right strategy in place and know where to look.

I’m not in the business of taking on excess risk just to make a quick buck. Thanks to my background in the military, it’s ingrained in me to avoid risk at all costs.

After all, my job was to help my fellow soldiers avoid roadside bombs, traps and other life-threatening situations. I’m not allowed to go into specifics, but I’m proud to say that my analysis helped keep myself and others safe.

Fortunately, risk management is no longer a matter of life and death for me. But still, I know how important your nest egg is, and I always keep that in mind.

That’s one reason why I’m such an advocate of using options, more specifically selling put options, to generate cash.

It puts you in charge.

If the word “options” scares you, don’t let it. Options are neither scary nor risky — they’re just misunderstood. (I’ve provided a free eight-minute tutorial on options below.)

You and I both know we could be headed for a major correction. After how bad the last one was in 2008, it could have a crushing impact on a lot of people’s retirement. The good news is that once the bear market inevitably comes, we should be able to respond quickly.

Of course, I’m not suggesting we wouldn’t take any losses. I would be suspicious of anyone who suggests that you’ll never lose money with their investment approach.

But the beauty of our strategy is that you’re not locked in for long periods of time.

The average options contract is between 30 and 90 days. Of all my trades, my average length has been 63 days. So when we see the market crashing, we can make changes to our strategy, open new options contracts and keep on profiting.

Compare that to locking your money up in an IRA, money market account or “buy-and-hold” mutual funds. Most investors who blindly follow this approach alone are likely to simply hang onto that money and keep losing — hoping for the big rebound.

My intent is to keep you proactively making the right strategic moves to not only protect your money as the market fluctuates, but also to help you profit from those fluctuations.

So far, that’s exactly what we’ve done.

Take January 2014. The market corrected during this period, dropping 3.6%. But the trades we made that month posted returns on margin of up to 7.5% and annualized gains of 22.7%, 26.4% and 53.7%.

Through the ups and downs of the past few years, we’ve collected money week in and week out.

So whether we are headed for a market correction, I’m confident we will continue to find opportunities in the market from energy firms and blue-chip companies to technology firms.

Regardless of the stock, we’ll be able to collect income immediately — no matter what happens in the market.

P.S. — If you’re new to options or just want a refresher, I’ve put together a free eight-minute training video that will give you a complete rundown on what it takes to be successful with options. You can access the video here.