Is everyone enjoying their lazy (for the market anyway) Thursday? Mild weather, mild movement from stocks, not much in the way of economic news... a perfect recipe for stepping away from your trader's role for an afternoon and doing whatever it is you do for fun. For me, that's bad golf, but I'm just as big of a fan as sitting back and enjoying some sun. For those of you who are truly addicted to the market though, there's never any rest - so-called "down time" is a reason to study and find new opportunities. Well, I've got one such idea for you today that I believe would be a GREAT place to park some money as we wade waist-deep into what could be a lethargic or even a modestly-bearish summer. That idea? Regional banks. If you're expecting me to say you should buy smaller national and regional bank stocks because they're outperforming the rest of the market, you're going to be disappointed. As a group, regional bank stocks have actually lagged the broad market since the beginning of the year. The SPYders (SPY) have gained more than 16% year-to-date, while the iShares Dow Jones Regional Banks ETF (IAT) is only up about 13% for the year so far. Like I said above though, this isn't about the past. This is about the future. While the S&P 500 may have been much hotter than the rest of the market of late, the market as a whole is also a lot more vulnerable to a pullback than the regional banks are. In fact, I've got this weird feeling that a summertime pullback is going to cause a flight to safety, and the steady-Eddie regional banks are going to be seen as one of the few safe havens. I'm also digging the chart of the iShares Dow Jones Regional Banks ETF. Since early 2009 we've seen this industry's stocks collectively get squeezed into a wedge shape, with a ceiling around $27.00 and a rising support line. Well, the upper edge of the ceiling is under some serious pressure now, and there's a ton of support just below where shares of IAT are trading now (support the broad market doesn't have). Take a look. Between lots of support and failing resistance, there's a good chance all of these stocks could stage a bullish jail-break real soon. Like I said above, the catalyst for that move could - ironically - be an otherwise-bearish market. As for ways to play it, I don't know that I'd go the ETF route. Pick one of the higher-quality stocks in the group, and you should be able to squeeze out a little more upside. I don't want to tell you exactly which ones to look at; I'm just trying to give you a theme-based tip. But, I can say you might want to start the search with Sun Trust (STI), Regions (RF), Cullen/Frost (CFR), Fulton (FULT), or Trustmark (TRMK). All of them are fundamentally solid, and none of their stocks are technically overbought right now. I know none of them are well known or well followed, but that's kind of the point - to find something a little off the radar that won't get swept up in any summer weakness. I'm not ready to make any of these ideas a Featured Stock or an official trade... at least not yet. Just wanted to give you an idea and some advice I'm pretty sure you're not getting anywhere else. I'll follow up if and as needed. By the way, if you want to know who's the best at spotting these bigger 'theme-based' winners, it's these guys. Step One to a Pullback is Now Complete Well, after five straight days of gains and gains in twelve of the last fourteen trading sessions, I can't say I'm surprised we finally got a dip on the fifteenth day. The S&P 500 had soared nearly 6% in three weeks for Pete's sake - it was overdue for a breather. The question is, was Thursday's small pullback just a breather, or is it a sign that all these recent buyers are finally ready to lock down gains, and kick-start a sizable correction in the process? We're leaning towards the latter. There's nothing we can talk about here that we haven't talked about ad nauseam already. We just had to wait for things to play out once the S&P 500 started to feel the pressure from its upper Bollinger band; time caught up with the market's recent rally today. Now that the vulnerability has been exposed, I've got a feeling we'll be revisiting the lower Bollinger band (currently at 1535) sometime within the next six weeks. On the other hand, I've also got a feeling at least some bulls are going to plow back in on Friday in an effort to convince everyone else as well as themselves that everything is fine. That's ultimately going to be a lost cause, though. The next close under today's close of 1626.67 will clinch the beginning of a significant pullback. In other words, stocks have been put on notice. As I said yesterday, we'll tell you when we see the crystal clear sign of trouble. Who Watches the Watchers? Finally, don't know how many of you say the article "Bear Market Checklist' Goes a Perfect 0-for-6" over at cnbc.com today, but if you did, will you indulge me for a second? I get what Morgan Stanley's David Darst is saying - we're not seeing any major red flags of a bear market yet. On the other hand, some of his interpretations and answers may be a little more arguable than he'd care to admit. The basis for Darst's "still bullish" argument is that the answer to each of these six questions is 'no': Is the Federal Reserve tightening monetary policy? Are stock price valuations stretched? Is investor euphoria present? Are bond spreads widening? Is there a recession looming? Are transportation stocks, small caps and bank stocks retreating? I'll agree the answers to #1, #4, and #6 are indeed 'no.' But, I take issue with #2, #3, and #5. I'll just break 'em down like that. #2: Are stock price valuations stretched? I suppose they're not compared to where they were just before the bear market began in 2007, and where P/E ratios were when the recovery first started in 2009. But, it's not exactly like stocks are cheap right now. The S&P 500 is priced at 16.4 times trailing earnings, and at 14.4 times its forward-looking earnings. That's as expensive as stocks have been on a trailing basis in the past three years, and it's at the upper end of the normal range. #3: Is investor euphoria present? Sorry, but with the VIX right at multi-year lows and the put/call readings at multi-month lows, euphoria IS present. #5. Is there a recession looming? Not that we're aware of, but have we ever actually been aware of one on the horizon (that we were willing to admit)? The premise of the question is flawed. I'm not saying he's wrong; I don't think were at the end of a growth phase either. But, it's a slippery slope when you get to cherry pick the criteria and then use your own answers as the evidence. Anyway, just wanted to offer some perspective from the other side of the table for anybody who found that article. And, I'll just add that we don't have to enter a full-blown bear market to suffer a nasty market correction. They're not one and the same. That's it for now. Have a good afternoon/evening, and we'll talk to you Friday..