The stock market's rally has clearly stalled. There is a growing risk that the S&P 500, the NASDAQ Composite, and the Dow Jones Industrial Average might all be forming a bearish double top pattern. Bulls can claim that the transports and the small caps are still hovering near their highs, which is positive, but these sectors could see some profit taking as well.
Readers may want to consider bearish positions as some sort of hedge against their long portfolio. Potential trades might be shorts or buying May put options on the major indices. Another alternative might be buying call options on the VIX volatility index.
If you're not comfortable with short positions or put options then consider raising your stop losses and/or reducing the size of your long positions to limit your risk.
No new trades tonight. We will be adding new candidates in the weekend newsletter.