Whoops. While it's too soon to say the long-awaited correction is finally upon us, today's action was certainly a step in that direction. The S&P 500 closed below the 20-day moving average line on Tuesday, for the second time in nine days. Granted, the first time the index closed below the 20-day average back on the 17th, the bulls immediately fought back and carried the index to a record high four days later. I just don't get the feeling we're going to get the same bullish response this time around, though. The first time we saw it, we could chalk it up as a fluke. To see it again just a little over a week later? More traders - too many traders - are starting to think the rally's out of gas. Truth be told, it's not so much the market's indices slowing down that has me worried. It's the VIX and today's volume that's got me thinking bearishly here. Our usual chart of the S&P 500 and the VIX, with volume, tells the story. The VIX didn't just close above its key ceiling around 13.2 today. It closed above 13.2 after logging a few weeks' worth of higher lows. The VIX's moving average lines have also crossed one another in an upward direction. It's a sign of a new uptrend for the VIX, and if the VIX is in an uptrend it means there's bearish pressure on stocks. We haven't seen any real trouble for stocks yet, but it's there - the VIX says so. Also of concern is the amount of selling volume we saw behind today's 0.45% drop from the market. And just so there's no confusion, yes, the bulk of today's volume was at the tail-end of the session when the selling was most frenzied. It just didn't look like anybody wanted to hold their trades overnight. It's not the most bullish of signs. This still isn't a sell signal, mind you. The market has been more than capable of overcoming worse than this of late, and we have to give it the benefit of the doubt now. My gut tells me this is the beginning of a pretty good pullback though, even if we happen to get a bit of a bullish reprieve on Wednesday. While we're on hold with the broad market, I wanted to show you an updated chart of all the major asset classes and indices, just to show you how they're all shaping up and who's winning at who's expense. Remember a few weeks ago we told you between stocks, bonds, and gold, there was always at least one winner and one loser in the bunch? For those of you who keep close tabs on the market's details, you may already know stocks and bonds have been rallying recently, and gold has been suffering (although gold hasn't exactly been crushed). Well, I think we've got a pretty good bead on where things are going for all three major asset categories. You know where we stand on stocks - sooner than later, the equity market is going to pull back. If we had to guess, however, bonds are positioned to keep rolling higher. Yields are slumping again, and partially-related, the value of the U.S. dollar is on the rise. Lower interest rates and therefore lower inflation are a couple of those things that are just out of anyone's control (even the Fed's), so the uptrend from bonds is effectively a foregone conclusion. The problem for gold in that mix is, since it's priced in U.S. dollars, it's apt to remain pressured in a downward direction now that the dollar and yields and bonds have all moves past key hurdles; see the dashed lines on the chart below. So what does this mean for stocks? Like we mentioned, one or two of the three asset categories is advancing or declining at any given time, so it's conceivable the stock market could tumble here with gold, while bonds continue to rally. Of course, nothing is ever set in stone. We're just assessing the situation as we see it today. Based on the strength of the trends we see on the chart, however, it's tough not to be wary of gold and bullish on bonds at this point. We'll let you know if there are any significant changes to our chart. What Are Consumers So Happy About? Well, we finished up the latest batch of real estate data today, hearing May's Case-Shiller Index (of home prices) figure this morning. Home prices grew 9.3% on a year-over-year basis, and though it was for two months ago, it was an encouraging data nugget all the same. It was also a welcome turnaround from Monday's disappointing pending home sales report for June, which was down 1.1%... the first decline in a few months. Even so, considering May's pending home sales pace of growth was a hefty 6.0%, we can't be too surprised buyers are taking a break. This is where all the major real estate trends now stand. Things could be better, but they could be worse too. You may have also heard this morning how consumer confidence levels popped for July. What you may not have heard is that, technically speaking, consumer confidence - according to the Conference Board anyway - is the highest it's been since right before the recession started back in 2007. I'm not overly impressed by where the consumer confidence score is now compared to where it was then; the context of the consumer confidence polls can change over the course of seven years. However, I am impressed by the continued improvement in confidence since hitting bottom in early 2009. I have no idea what people are seeing that's so great, but if they're feeling good it means they're spending and investing, and that'll do until the economy is truly self-sustaining and has reached escape velocity. We'll get the final reading for July's Michigan Sentiment Index on Friday. It's telling the same story, though... folks are feeling better and better. While we may not "get it", we do know what the public says and does isn't a force we want to get in the way of. Of course, this week's big economic news is going to be Friday's unemployment report for July. As it stands right now, we actually won't be looking at the nitty-gritty employment details on Friday. That'll have to wait until Monday. We'll explain why below. Portfolio Update In case you were wondering, no, I hadn't forgotten we still have a couple of open trades in the portfolio. We continue to hold Astec Indus. (ASTE) and The Laclede Group (LG). We just haven't had a lot of time to talk about either pick. We're going to make some time today though, starting with Laclede. It's been slow-going for LG since our June 25th entry, but we knew this would be the case going into the trade. It's a gas utility stock, and it's not like gas utility names are fast movers. And you know what? We're ok with it. This is a low-risk, longer-term trade, so we'll have to be patient. We're still feeding on the breakout of the wedge pattern evident on the weekly chart. There's another ceiling developing around $48.70, and once Laclede pushes past that ceiling, I can see another rally unfurling for us. For those of you who are interested, Laclede will be releasing last quarter's earnings and hosting a conference call on August 7th. I'm pretty sure we'll still be in the trade at that point. We don't mind taking on this kind of event risk in the case of LG, as the company has topped estimates in most of its recent quarters. You may have also seen The Laclede Group has received permission to buy Alabama Gas. It should be a solid, accretive pickup. As for Astec Industries, we came close to cutting loose of it within the past few days. I just can't bring myself to do it though. Yes, ASTE has been in a downtrend since the beginning of July, but it's not like we haven't seen downtrends from this chart before. Most of them are undone with an equally strong rally right when it seems there's no hope... kind of like now. What's interesting (and the reason we're sticking with it) is how well Astec did when it unveiled Q2's numbers last Tuesday. The company topped earnings estimates and pumped up revenue. While it hasn't helped the stock any yet, we can afford to give it a little more time. We're NOT going to give it a lot more time, however. We continue the hunt for new ideas, but this lethargic and inconsistent market just isn't letting too many stocks break out. We've got our eye on a handful of possibilities, but we want to play things close to the vest for now. We also want to keep our powder dry for the new micro cap trading idea we mentioned to you in yesterday's newsletter. We're not going to be able to get all the due diligence we want to do done in time to deliver it to you Wednesday. As it stands right now, we should be able to send you the details Friday morning, before the open. We'll let you know if the timeframe changes in the meantime. If you just can't wait until then, however, you'll get a lot more trading ideas on a regular basis here.