Dr. Kris'  Instablog

4:00 pm ET: Today the market marched in like a lion and limped out like a lamb. The mid-day turnaround looked to be the bulls passing the baton to the bears. For the past few days we've been noting that the VWAP's (a measure of "Smart Money" activity) on both the buy and sell sides have been elevated indicating a possible changing of the guard. Note that there are only three more trading days left before the "Sell in May" phenomenon kicks in. Of course there are no absolutes in the market and, yes, this year could indeed be different--but I don't think so. I gave four reasons to support my thesis yesterday. Here's another one to add to the pile.

Yesterday, CNBC ran not one but two separate segments showcasing bigwigs at Goldman Sachs, both of whom are bullish on the market. The reason they gave was the same: Their in-house economists think the world is in a state of economic expansion which will continue to fuel not only our stock market but markets abroad as well. I don't know what numbers they've been looking at but I'm sure not seeing much that cheers me. Recovery in the Eurozone is tenuous at best and who knows what China's growth stats really are?

In this country, not everything is as rosy as it's being painted. Sure, the financial media has been touting that 70% of all companies that have reported so far have beaten earnings estimates but what they've been omitting is that overall revenues are falling. This fact indicates economic contraction, at least it does to me. But not being an economist, I certainly could be wrong.

Whatever.

Putting this all aside, the fact that two spokes-folks came out publicly spinning the same yarn has me thinking that Goldman must be building up a huge short position in the equity markets. Yes, this is the cynical point of view but if past Goldman dog-and-pony shows are any indication, I'm sticking with it. (I've always been suspicious that something's afoot whenever Goldman trots out Abby Joseph Cohen.) With that said, I'm mounting my soapbox and recommending that people prepare to batten down the hatches as May could get very ugly.

Subscriber Notes: There is one new Stock Darling.

4:00 pm ET: Today's Highlights
The major averages continued their rally despite some negative economic figures. This market seems to be advancing on fumes and some storm clouds are forming on the horizon. To wit: 1. Despite today's advance, the Dow Transport Index (DTX) still hasn't been able to break out of its downward trending channel; 2. The low VIX is indicating growing investor complacency; 3. Negative VWAPS, a measure of institutional selling, are on the rise even on bullish days like today; and 4. Consumer staple stocks are selling off which could be an early indication that conservative investors are moving into the safety of cash. (Also, this sector could just be taking a much needed break.) No need to run for cover yet but you should be readying your game plan if and when the market turns around because it could happen soon and very quickly.

Aerospace and defense stocks saw lift-off today as industry giant Boeing (BA, $91) reported better than expected earnings with an improved outlook for delivery of their problem-plagued Dreamliner. The news not only sent shares of the company to new yearly highs but also those of Northrup-Grumman (NOC, $74) and Orbital Science (ORB, $18). All of these issues gained 3% on heavier than normal volume. On a technical note, I think they're all solid buys at these levels and I particularly like the strength in Northrup-Grumman's chart, having recently rallied through $70 which has proven to be a multi-year resistance level. As an added bonus, all of these stocks pay a 1% dividend.

Upward momentum is increasing in solar stocks which numbered among today's biggest winners. Shares of First Solar (FSLR, $12) jumped 12% on twice normal volume to hit a new yearly high. Outpacing this move was that of JinkoSolar (JKS, $6.54) which gained a whopping 15%, also on heavy volume. The stock broke through $6.50 resistance and if it can keep up this pace, it'll be testing $10 major resistance in no time. The gain in solar issues helped boost a couple of Clean & Alternative Energy etfs (GEX, QCLN) to new highs.

That's it for now. Getting ready for next week's NAAIM conference in Denver so I must scoot.

Subscriber Notes: There is one new Channeling Stock. Regarding yesterday's Stock of the Day candidate (which was up another 5% today), I sold some May 22.5 cash-secured puts for $1.30 as a buying mechanism. The put options are not heavily traded so if you want to follow suit, please use limit orders (day orders only!) and stand your ground. My trade languished for hours until the market maker relented just after the closing bell. (Options can trade for up to a half hour after the bell, FYI.)

4:00 pm ET: It's after hours and Apple stock (AAPL) has been halted pending their earnings release. As mentioned yesterday, this report could make or break the stock, at least in the short term. After hours trading is typically non-eventful but today's earnings release could easily cause some fireworks.

...Okay, Apple shares just re-opened, trading up $20 on news that the numbers weren't as bad as expected--whew! This move will likely cause the tech-related tracking stocks--the SPY and the QQQ's--to jump on tomorrow's open. Today's less-than-bad news should boost the spirits of Apple-heads everywhere, at least until the next earnings release. Keep your fingers crossed that Tim Cook can pull a rabbit (via a new product besides the iPhone5) out of his hat by then...or even darker clouds could gather over the next earnings announcement. Commenting on today's report, a Jeffries analyst on CNBC predicts that the upcoming release of the Samsung Galaxy S4 phone will take significant market share away from the iPhone. Apple had better not rest on its laurels!

In overall market action, the major averages extended their recent move back up. The jump today in both the Nasdaq and the small-cap Russell 2000 (RUT) was impressive but the fact that the market-leading Dow Transports (DTX) turned around was a bit of a downer. It hasn't been able to break through its downward trending channel and until it does, I won't be taking on any new positions (except for today's Stock of the Day). Also, the VIX is now trading back under 14 which is getting close to being in contrarian territory (typically under 13). The next few days should tell us if the "Sell in May" scenario will come into play this year--right on cue!

Trade Note: Beware of Jumpin' Jack Flash Crash!
Today's flash-crash arose because of an erroneous tweet that was hacked onto the Associated Press' Twitter stream. This one tweet caused an instant destabilization in both the equity and currency markets, amplifying just how fragile this market really is. The crash lasted only a few minutes but that was long enough to take out a lot of stop-losses resulting in undeserved investment losses. This event is an unfortunate and (I hope!) unintended result of computerized trading, but it is now part of the "new normal" of the trading environment. This should be a cautionary tale to those of you who have hard stop-losses (i.e., good-until-cancelled sell orders) on your stocks. I understand that many people simply do not have the time to constantly monitor their positions but this is one good reason to set mental rather than physical stops. A better approach might be to set up email alerts with your broker to notify you when your stop-loss level is reached. This way you'll still have the peace of mind knowing that you have some protection while also being in the position of deciding whether or not existing circumstances merit taking action.

On the other side of the coin, if you have a short position, a good-until-cancelled buy order set at a low price could work in your favor during a flash crash, provided there's time for it to get executed. Some things to consider...

Subscriber Notes: There is one new Stock of the Day that I strongly urge you to take a hard look at. This company is forging partnerships left and right and is poised for explosive growth.