Are You High?

During the past several weeks, we’ve been keeping a watchful eye on three specific charts. Those charts are the S&P 500 Index, China and crude oil. For the past couple of weeks, the S&P 500 managed to move into new 52-week high territory. Yet, right after hitting that high, the market sold off.

China also hit a new 52-week high a couple of weeks back, but since then the iShares FTSE/Xinhua China 25 (FXI) also has come well off of its highs.

In the case of crude oil, here we see that despite a nice run higher off of the July lows, oil prices are nowhere near their 52-week high.

So, what does this all mean? Well, I think it means that we finally could be seeing a chink in this rally’s armor. The evidence of profit taking is indisputable and, if this selling trend continues, it could mean a wider sell-off heading our way.

My advice here is to make sure that you have stop losses on all of your invested positions to ensure that you don’t lose out on the gains you’ve made in 2009. If you still are waiting on the sidelines for a pullback, then you may want to wait a little longer before taking the plunge. I suspect this market will sort itself out during the next couple of weeks. But whichever way things go, you owe it to your wealth to be prepared.