The markets are seeing red today with the SPDR S&P 500 ETF (NYSEARCA:SPY) trading at $135.86, -0.60 (-0.44%). After Greece received its second bailout over the holiday weekend, the markets have started to show major cracks. Interestingly enough, this is happening just as the retail investor is jumping back into the market. This is setting up for a sell off and pivot top of 2012. Yes, you heard it first here, we are close, if not at the highs of 2012.
The first crack must be recognized by viewing the reaction to the Greek bailout. Any positive news out of Europe since the start of the year has been met with buying. Even negative news has only sent the markets lower early in the day, then higher into the close. This positive reaction has failed in the two days of trading this week. This is a sign of a market top approaching.
Secondly, the Dow Jones Industrial Average tagged the master 13,000 level yesterday. No sooner did it tag that level, then it collapsed back down. The lack of conviction on the buy side to hold the Dow above 13,000 must be noted. In addition, the SPY 2011 high on May 2nd was $137.18. Yesterday, the SPY hit a high of $137.05 and reversed. The fact that the SPY could not even touch the 2011 highs is something to note and signals weakness.
There are other factors as well. Dow Theory is not confirming for one. The transports are not leading along with the Dow Jones Industrial Average. This is problematic for the overall market health. Also, ever since Apple Inc. (NASDAQ:AAPL) topped at $526.29, the PowerShares QQQ Trust, Series 1 (ETF) (NASDAQ:QQQ) has not made a new high. Technology has lead this market higher and is now faltering.
As the markets top out, some great short trades start to emerge. The proprietary radar is picking up Caterpillar Inc. (NYSE:CAT) and Mastercard Inc (NYSE:MA) as two stocks that are perfect for a short. Others are available as well.