Dr. Kris'  Instablog

4:00pm ET: A bump in the housing and consumer sentiment numbers gave the major averages a boost on the open. However, the euphoria didn't last long as sellers stepped in and applied considerable pressure sending the market into retreat. Despite the fact that most of the major averages still managed to close in the green, the market-leading Dow Transport Index (DTX) ended up in the red. Combine this bit of bad news with a rising VIX and you have two essential ingredients for a build in downward momentum.

Some sectors are looking toppy, especially aerospace & defense (PPA) and semiconductors (SMH, SOXX). Feeling considerable pain today were the industrials (XLU)which broke yet another support level. Bonds, too, weren't immune from the intraday sell-off. Both short and long duration Treasuries sank taking the mortgage REITs (mREITs) with them. Getting hammered (and not in a fun way) were widely held American Capital Agency (AGNC) and Annaly Capital (NLY) which shed 4.7% and 3.5% of their respective values. Although it may not be quite time for you bulls to throw in the towel, it would be a good idea to begin taking some chips off the table, especially if you've enjoyed a nice run-up.

Remember, it's better to lose a little upside than to risk losing a lot of downside.

Subscriber Notes: There are no new entries but I'm working on some Stock of the Day candidates. Friday's Stock of the Day pick was up a whopping 18% today--woo-hoo!

4:00pm ET: The market maintained yesterday's status quo as both Wall Street and Main Street checked out early. The major averages ended the day higher with the notable exception of the Dow Transport Index (DTX). Being a leader of market direction makes this a cause for concern but the fact that it hung in there and the VIX was able to back off of yesterday's advance is encouraging. Perhaps the past week's consolidation was just the fuel needed to stoke a further rally but the P/E multiple of just under 18 on the S&P 500 is becoming rather rich.

Next week is chock full of economic landmines including the revised GDP figure on Thursday and personal income, Chicago PMI, and Michigan consumer sentiment numbers on Friday. These could be very telling as to how the Fed may react in the next few months. Numbers indicating growth could actually be bad for the equity market as this might prompt a Fed change in stance from dovish to hawkish (meaning an earlier than anticipated end to quantitative easing and a rise in bond yields).

Considering the frothy nature of the market coupled with these economic landmines, what's an investor to do right now? I do believe that a VIX close above 15 would justify buying some protection and should the VIX continue to advance, then getting into bear funds would make fiscal sense.

That's it for now. I, too, am bugging out early for the weekend. Have a good and safe one and please do take a moment between flipping burgers to remember those in our armed forces who have courageously fought for our freedoms over the course of this country's history. A 21 gun salute to all of you!

Subscriber Notes: There is one very exciting Stock of the Day--do make time to check this one out!

3pm ET: Market Alert!: The "Sell in May" scenario may be kicking in!
Today's dramatic rise in the VIX and corresponding dramatic drop in the major averages lead by the DTX (a leader in market direction) could spell the end of the current rally. Long-term investors may wish to buy protective puts while traders should consider booking profits. Should the VIX close over 15, swing traders and bears may wish to initiate short positions or take positions in the levered bear etfs.

Here are some of the more popular 3x levered bear funds along with current approximate share price and today's percentage gains: Short Dow30 (SDOW, $40, +0.5%); Short S&P500 (SPXU, $23, +1.4%) and (SPXS, $10, +1.6%); Short Russell 2000 (small-cap stocks) (SRTY, $20, +3.8%) and (TZA, $32, +3.8%). These are all higher risk plays so please monitor them closely and set a mental stop-loss before you initiate a position. More conservative investors can use the unlevered total bear market fund (TOTS, $26, +1%). While the bears are playing, the bulls should be busy building their shopping lists for when the market turns around. Let's hope that's soon!

Subscriber Notes: There are no new entries as I'm waiting to see in which direction the market decides it wants to move.