The “cash on the sidelines” is a Supply/Demand argument that we’ve struggled with even in the most bullish of times; every purchase of a security is matched with a sale. But even taking the argument at face value, current holdings of retail investors and mutual fund managers suggest that the cash left the sidelines long ago.
The Major Trend Index shifted to Negative status as noted in the special May 22 Interim Memo. However, downside vulnerability appears quite limited. At any rate, expect a good market in the last half of 1984. It is too late in the decline for most to build cash, although some futures hedging may be appropriate for those who can.