Recently I was having a respectful conversation with a gentleman on Stocktwits who was dubious about my perspective on the market. Based on his screen name, I could tell that he prided himself on being a contrarian and not feeding into the hype of the crowd. Fair enough.

Although we couldn’t seem to find a common ground, I ended up learning quite a bit from our dialogue.

He pointed out that my analysis of small cap ETFs may be faulty because the price to earnings ratio (P/E) of the iShares Russell 2000 ETF (IWM) is currently at 80. That’s compared to a P/E of 21 on the SPDR S&P 500 ETF (SPY).   So by his logic, small cap stocks are thoroughly overvalued and caution should be warranted.

He then asked me if I thought the market was stretched similar to 2000 and 2007 – right before stocks took a huge dive. I replied that it’s difficult to discern where the market is in relation to a fair value and that it has more to do with your current positioning and perspective rather than an absolute measure.

The conversation could have kept going forever. We could have debated technical versus fundamental methodologies, headline worries over Greece and the Fed, or whether Coke is better than Pepsi.

We would probably agree on some things and disagree on others. That’s alright – it’s what makes a market. Investors have been taking opposite sides of the fence through a capitalistic supply and demand system for hundreds of years.

Ultimately, the market may very well be near its peak and fall 20% in the second half of this year. I have no way of knowing that and neither does anyone else. I avoid trying to call tops or bottoms because the margin for error is huge and the net impact on my client’s wealth would be devastating.

I view the market through a lens of technical analysis and relative value among the asset classes we have at our disposal. That leads me to build balanced portfolios using low-cost ETFs (and sometimes mutual funds) with the goal of low volatility and capital appreciation. Any changes that I make along the way are done so incrementally and with a calculated view of risk and reward.

The bottom line is that where we are at in the market cycle is all about your perspective. Fundamental analysts probably believe we are stretched, while trend followers are cheering the direction of stocks.

The most important thing to remember is to not become so overly biased that you lose out on a significant opportunity in either direction. I have seen a tremendous amount of opportunity and real money that is wasted because people are overly bullish or bearish. Successful investing starts with managing your emotions and setting realistic expectations based on the market we have in front of us.