Swap McDonald's (MCD) into Papa John's Pizza (PZZA).

Swap Starbucks (SBUX) into Panera Bread (PNRA).

Swap Chipotle Mexican Grill (CMG) into Jack's (JACK)(click to enlarge)

The Chaikin Power Tools Swaps Report

Eliminate the landmines in your portfolio before they blow up your investment results.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

Even though we need one year of data to compute our 20 factor Chaikin Power Gauge Rating, we know that Facebook would have a bearish rating because four of our key factors are clearly bearish.

• Valuation is Very Inflated
• Insiders Have Been Selling
• Chaikin Money Flow is Bearish
• Chaikin Price Trend is Down

We have even more evidence to support that conclusion.

Renren (RENN) is called the "Facebook of China." As a social network whose shares have been trading in the U.S. since May of 2011, RENN has had a bearish Chaikin Power Gauge Rating since May 1 at a price of $6.33. It closed at $4.72 today, down -25% since the Power Gauge turned bearish.

The Facebook Power Gauge Rating would also be bearish today and will probably be bearish in six months.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

The push from better than expected earnings reports from Apple, Amazon, International Paper, Merck and many of the major financial institutions is being met by headwinds from fears over Spanish and Italian debt downgrades and the resultant drain on the European economies.

Last week we said

"Breaking out above 1,420 on the S & P 500 would take a confluence of favorable news including Apple reporting spectacular 1st quarter results on Tuesday April 24. Watch those earnings closely, as volatility will increase dramatically both before and after Apple's earnings report."

Apple did report spectacular 1st quarter results but the Spanish debt crisis lingers as a drag on the European economies and the U.S. stock market.

For these reasons the market will have difficulty breaking out of the 1,350 - 1,420 trading range. When the positive effects of 1st quarter earnings reports and up beat guidance from company managements subside, the market is likely to churn around and test recent lows.

How Do I Invest In a Trading Range Environment?

Continue to use periods of short-term weakness to buy strong stocks in strong industry groups. The Chaikin Power Gauge Ratings (see my rating methodology) make it easy to know what groups and stocks to focus on.

Recent examples of the success of the Power Gauge Ratings include Apple (AAPL), eBay (EBAY), PNC Financial (PNC), U.S. Bancorp (USB) and Verisk Analytics (VRSK).

It is particularly important to use the current short-term market strength to weed out the worst performing stocks in your portfolio. Sell off the laggards, particularly those stocks with a bearish Chaikin Power Gauge Rating, and use the proceeds to buy stocks on weakness which have better potential.

Netflix (NFLX) and Deckers Outdoor (DECK) are two examples, just this past week, these are two examples of stocks where continuing bearish Power Gauge Ratings were followed by negative earnings surprises which pushed both stocks down 20% in overnight trading.

If you own stocks which have made new lows recently or have not rebounded with the market, there is probably a good reason. You may not know the reason, but this kind of negative price action is the tip off.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

After a 3 month move to the upside the major banks are overextended. Don't chase them here but rather buy them on pullbacks.

Stocks with a bullish Chaikin Power Gauge Rating which also have strong technical patterns and bullish Chaikin Money Flow include:

Bank of America - $BAC

Citigroup - $C

JP Morgan Chase - $JPM

U.S. Bancorp - $USB

Wells Fargo - $WFC

All of these stocks are overbought. However, given the depths of the declines which preceded the lows, in the October - December 2011 time frame, they may not pullback enough to satisfy those on the sidelines who did not participate in this extraordinary upward move.

Use pullbacks of 5- 10% over 3 - 7 trading days to establish positions or add to existing holdings in the major bank stocks with bullish Chaikin Power Gauge Ratings.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

Two weeks ago we made a bold assertion:

"Why in the world would investors sink $10.6 billion into bond funds with little or no yield, when inflation and higher interest rates may be just around the corner?"

On 3/15/12 the 10 year Treasury Bond closed below its 200 day moving average (negative implications) for the first time since April of 2011, with yields spiking to new 4 month highs of 2.29%.

Stocks, on the other hand, closed at new bull market recovery highs, with the S&P 500 Average closing at 1,404.17, up almost 3% for the week. For the year the S&P 500 is up 11.65%. The stock market is within 3 % of our minimum target of 1450 for 2012 and the skeptics are perplexed.

However I sense a subtle shift in market psychology. This week stock market pundits are finding reasons to like the market in the face of an overbought, but not overheated, market.

With the market overbought and the naysayers overwhelmed by new highs, perhaps it is time for a pause or a pullback.

What's Right in the Economy May Lead to a Pause in the Rally

This week's good news included the following:

Retail Sales Up, Jobless Claims Down, Philadelphia Fed Survey of Economic Activity Better than Expected, Analysts Turning More Positive and VIX Volatility "Fear Index" At Lowest levels In More Than a Year.

With all this good news and the market already up 11.65% for the year, stocks may pullback. If they don't and you have been following our advice, since October, to buys dips then you should fare well.

While long-term investors can still look to put money to work on dips, in stocks with a bullish Chaikin Power Gauge Rating (see my rating methodology), more nimble and opportunistic investors should look to take some money off the table by taking profits in stocks which have performed well and most certainly by selling stocks with bearish Power Gauge Ratings.

The Best Advice I Ever Gave My Institutional Clients

If the market has made a series of new highs and you hold stocks which have not made new highs recently, ask yourself why.

If you own stocks with a bearish Power Gauge Rating, don't dawdle, just acknowledge reality and raise cash to put to work on a market pullback.

Click here to view this week's industry group report feature the strongest and weakest industries with the most bullish and bearish stocks.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.