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I hate being a skeptic some times. The last three months have been very good to the market and to my portfolio. However, I think that the rally has little left in the tank, and investors are getting very complacent here. I am slowly moving more of my portfolio to cash and actively looking for new shorts to action closer to the end of 2012. We might have a few more percent of upside simply because money managers are increasingly desperate to catch up to their benchmarks to get that year-end bonus. The very end of the year and 2013 are likely to bring much tougher times to investors. Here is just a small subset of negative items lurking under the surface of this feel good rally.

10 Things to contemplate heading into the weekend

  1. I think Mohamed El-Erian got it right on CNBC this morning calling the latest Fed actions a "Reverse Volcker Moment" where the Federal Reserve is trying to create inflation. He further states that the moves are likely to overshoot and leave mess for Helicopter Ben's successor.
  2. QE3 also is starting to have major detractors oversees. Brazil finance minister came out this morning stating "the U.S. Federal Reserve's "protectionist" move to roll out more quantitative easing will reignite the currency wars with potentially drastic consequences for the rest of the world."
  3. The third quarter is likely to produce the first negative earnings growth for the S&P since 2009, a fact that the market seems to overlooking at the moment.
  4. Warnings season seems to be particularly active. 3M (NYSE:MMM) became the latest large S&P member to lower its outlook given tepid worldwide demand.
  5. Measures of worldwide manufacturing health are not encouraging. China's flash HSBC PMI rose to 47.8 in September from the 47.6, which would mark the 11th straight month of contraction in Chinese manufacturing. Eurozone manufacturing PMI increased to a preliminary 46 in September which would be consistent with a contraction of .6% of Euro zone GDP
  6. Bloomberg projected earlier in the week that €326B was withdrawn from Spain, Portugal, Ireland and Greece in the year through July and €300B was deposited in seven core countries, including German and France. This flight is counteracting ECB efforts to ensure liquidity in the periphery.
  7. Spain is likely to ask for a formal bailout by the end of the year and Italy is on the clock.
  8. Romney's much talked about "47%" comments have raised the probability that domestically we get to find out what Jimmy Carter's second term would have looked like. I will have a separate article on this at some point in the future, but it boils down to one word… stagflation!
  9. The VIX is near 2012's lows, usually a good contrarian indicator and a sign of complacency in the market.
  10. The job market is anemic at best. There could be major layoffs in financial services over the next six months as the increased cost of new regulations and reduced trading volume eat into profitability. Bank of America's (NYSE:BAC) announcement that another 16,000 people that will get the ax might be the first announcement of many in the sector.

Disclosure: I am long BAC. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.