The markets have moved up a bit since the last posting, but they aren't yet at the resistance areas that I talked about in last Thursday's posting. Even if we do hit them soon, I still think the markets will move more sideways until the end of the year. We did see the first divergence today in the Dow Transports and the Russell 2000. Both indexes were down while the Dow posted a 52 point gain. This doesn't mean that the market will plunge tomorrow, but it could be an early sign that the strength of the rally is starting to dissipate. I will watch that divergence closely tomorrow to see if it is gaining any momentum. I still recommend being in a mostly cash position. I know it's hard to be patient, but it is the right thing to do right now. Some stocks are starting to look very bearish including AMZN, CF, NFLX, WYNN, and BIDU. A continued market rally could hold these stocks up a bit...but when the selling starts, these stocks will likely be the first to drop. IBM and CAT look good for bullish trades if the market does move higher, but be careful not to over commit to bullish trades right now. I think the larger downside potential is greater than the smaller short term bullish potential.
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