Editor's Note:

(August 18th, 2012)

It was shaping up to be a super quiet week for stocks until equities surged on Thursday. Now the S&P 500 and the Dow Industrials are testing their 2012 highs. The NASDAQ is showing strength but not quite at its 52-week highs yet. Meanwhile both the small cap Russell 2000 index and the transports decided to participate in the rally, which helped alleviate some technical fears.

Overall stocks continue to advance in spite of generally weak economic news. The only positive surprises were the recent retail sales numbers and consumer sentiment figures. While these were positive the overwhelming balance of economic data remains soft. Stocks seem to be rising on hope for new stimulus from the world's major central banks (U.S., Europe, China). If no stimulus announcements are forthcoming in the next few weeks then stocks are likely to drop.

There is no denying that the trend is up. In spite of the economic data I am cautiously bullish. However, that doesn't mean we have to load up the truck on new positions at this time. Instead of adding new trades tonight with the S&P 500 sitting just below resistance I've added five new candidates to the watch list instead.