For now, I'm sticking with my prediction of a tediously bullish summer, but there are some unmistakable warning signs that suggest stocks could fall over the near-term, perhaps sharply. Below is a chart that I published intraday that shows an incipiently bearish arc developing in the Dow Average's daily-bar stochastic. While it would require only a modest rally over the next couple of days to render this pattern docile, a mild decline could just as easily turn it savage, setting up a downdraft of perhaps 300-500 points. If so, the reversal will have begun from a logical place, since it was just a few days ago that I signaled a potentially important high in the S&P cash index. The analysis was as follows: 'Heads-up: The S&P cash index has stalled today within an inch of a fairly important hidden-pivot resistance. I hadn't noticed it earlier, but when a friend with whom I talk regularly asked for a reading on the S&Ps, my calculations produced a hitherto unobserved hidden swing point at 1205.61. Since the actual high was at 1205.64, we should be alert to the possibility of a substantial pullback from these levels, or perhaps even a major top. Please note, however, that a two-day close above the pivot, or an intraday move exceeding it by more than a point or so, would signal additional upside potential to as high as 1275.' Considering the foregoing, as well the possibility that long term-yields may have bottomed for a while, we should be extremely cautious about taking on any new long-stock positions right now. Meanwhile, we are prepared for the worst by way of QQQ puts we've been accumulating, most recently June 39s for 0.65. We also hold a substantial number of June 34 puts as part of a rolling short position
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