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Editor's Note:

(May 18, 2014)

The big cap indices continue to drift higher while the small caps continue to drift lower. This divergence will not last forever. Eventually one group of stocks will reverse and join the others. After 950 days without a -10% correction in the S&P 500, what are the odds that the big caps don't follow the small caps lower? Another way to look at it, the last 35 times the small cap Russell 2000 index produced a -10% correction (since the year 2000) the big caps followed them lower. The Russell just produced its 36th -10% correction. Will the big caps follow this time?

In tonight's market wrap I mentioned how there are pockets of strength. This past week we saw four of our five watch list candidates graduate to our active play list (AIG, CHK, ITW, and WSM ). It was a successful week for our watch list. Tonight we are adding three new candidates to the watch list (AAL, PKG, and VFC). I urge investors to be cautious on launching new trades. Consider starting with small positions to limit your exposure.

Summers can be a tough time for the bulls and summers ahead of a midterm election can be especially rocky. That doesn't mean there aren't exceptions. We just need to be careful.

I am not adding any new active trades tonight.