Dr. Kris'  Instablog

3:40 pm ET: The S&P 500 (SPX) managed to pierce its previous high set back on April 2nd, but it wasn't able to hold it. Following the morning high, all of the major averages began selling off with the selling pressure intensifying as the day moved on. Forty minutes before the close, the internals are getting even uglier: The average negative VWAP is now -117 (very bearish), the VIX is up nearly 10%, and the Trin is starting to rise. Not only that but commodities, which experienced a pop on the open, are falling, and falling fast. Silver appeared to be breaking out but today's move could be nothing more than a head fake, something that this commodity has been known to do in the past. (To see this for yourself, pull up a daily chart of the silver etf, the SLV, and note the bullish breakouts on 6/6/12, 2/28/12, and 10/27/11 which didn't find any follow-through.)

On top of it all, the greenback is starting to make a comeback after this morning's gap down (see the chart of the UUP, the long dollar etn). What all this signals is a very possible end to the "risk-on" trade, meaning an advance in stocks and commodities (i.e., riskier assets) at the expense of the dollar and Treasuries (less risky assets). The big move in the VIX is also showing that fear and uncertainty are creeping back into the market. So what's a trader or investor to do?

Investors should definitely consider either taking some profits and/or protecting their long positions with stock or index puts. Traders can begin looking to play the downside. With volatility still relatively low, now would be a good time to buy some longer term index puts (3-6 months out at least).

It sure appears as if this bull run is at an end but in the dog days of summer, anything can happen. However, I'd be wary of making any bullish bets until the SPX can close above 1420.

Blog Note: The Stock Market Cook Book will be taking a mini holiday beginning tomorrow meaning there will be no blog until next week. If you're a bull, I'd suggest you do the same, too.