In This Edition... The 'Bear Market Rally' Litmus Test is Now Being Given  New Bearish Trade: Ampal-American Israel Corp. (AMPL)  Recommended Actions for Open Trades: Lock in 36% Gain on CHUX Market Update: Let The Bearish Games Begin So was the last eight weeks just a bear market rally, or was it really the beginning of a new bull market? We're about to find out.  Believe it or not, the last three days are the first time the S&P 500 has taken three consecutive losses since the rally began back on March 10th. It's also the biggest rollback we've seen from a peak high since then - between Monday's high of 930.17 and today's low of 882.80, the SPX has fallen a hair more than 5.0%.  I'm interpreting those hints as a sign that things have changed for the market. On the other hand, this is hardly a reason to freak out yet. Play defense? Yes. Freak out? No.  Now that the bearish ball is rolling, I think it makes sense to start looking for a downside target. The only one I see as of yet is 830, where you'll find a 38.2% Fibonacci retracement line. That would ultimately mean a 10.8% pullback for the S&P 500, which would actually be healthy - big enough to humble the bulls, yet small enough to not destroy all our recent confidence progress.  If 830 fails to hold up as support, then we can start talking about a resumption of the bear market. I certainly wouldn't be adding a lot of long trades in the meantime though.  There's a small chance (very small) the S&P 500 will pivot at the 7x5 displaced moving average (blue) at 887 and resume the uptrend, as it did in late March and late April. That's a long shot though, given how overbought we were.  Note that after today's big dip we may see some bargain shopping tomorrow. While anything's possible, I don't think we need to flinch just because we see a few nibbles during Thursday's session. I still think the risk/reward ratio now favor the bears, though it may take a few more days for that premise to materialize.    New Bearish Trade Ampal-American Israel Corp. (AMPL)  If the name rings a bell, it's because we actually put this stock on a watchlist on May 7th.  At the time AMPL was finding support from a couple of different sources, though the bullish effort was fading fast. Since then, Ampal-American Israel shares have broken under those support lines. The selling volume has been stronger than average as well.  We're not going to set a specific target for this short/bearish idea, though we will point out how $1.46 was a springboard in late March, and $1.08 was a significant turning point in early March.  By the way, not all brokerage firms will let you short a stock under $5.00. Some do, but some don't. You may have to call this one in, or call to check and see if you can short AMPL online.   A Note About All Our Trades... With today's big pullback - and potential downside for the near future - it got me thinking about something that I've said before but bears repeating now. If you see an opportunity to lock in a nice gain on one of our picks, don't wait for us to explicitly say so - go ahead and do it. Likewise, if you see a reason to make a defensive exit on one of our picks, we may not be able to send that message out quickly enough - go ahead and bail out on your own. The reason I bring it up.... statistics show that 3 out of 4 stocks move in the same direction as the market. If we've got thirty long/bullish ideas 'out there' (as we do right now) and things change like they did today, we may not be able to suggest exits fast enough to keep up with the tide's reversal.  We'll still try and keep tabs on all of our picks. We just don't want you to feel like you can't take care of business on your own, and squeeze out the maximum gain.    Action Needed Though we just said we weren't going to try and detail every nuance of every single trade we suggest, we will try and hit the highlights when merited. Here's a handful of observations that require action from your end. Hexcel Corp. (HXL) - Normally I wouldn't worry about a pullback that was just matching the market's ebb and flow, but Hexcel is unique in that once it starts a trend, the trend tends to stay in motion. And, with key support levels breaking down today, I think there could be more downside in store. If you're in a Hexcel position, I suggest getting out and taking a small loss before it turns into a big one. OSG America L.P. (OSP) - This is a short/bearish trade that got off to a great start, but interestingly, the stock seems to have found a floor around $6.70 this week. Our entry at $8.01 and the current reading of $6.71 roughly translates into a gain of 16.3%. Not bad. The concern is the support - why did the selling get stopped cold at $6.70? I suggest you lower your stop loss (or put one in place), as the selling may be drying up. China Distance Education Learning Ltd. (DL) - We got off on the right foot when we shorted this one at $5.30; shares were at $4.28 a couple days later. The very next day the stock reached a high of $5.49, giving us plenty of 'excitement'. The pop was just a one day wonder though, and it looks like the original downtrend is back en route - DL closed around $4.60 today. Given how volatile this one can clearly be, I recommend you go ahead and apply a protective stop. Don't get too tight with it, as I think the volatility will be more bearish than bullish. Just protect the profits you've got. Hyperdynamics Corp. (HDY) - I really thought the ousting of the former CEO was going to jump-start a rebound, based on the high-volume surge we saw the day the announcement was made. No dice though. The stock refound its familiar bearish footsteps.  Let's go ahead and get out of this trade altogether... we've got enough things to worry about without babysitting this one. Malaga Financial CP (MLGF) - There's nothing particularly wrong with Malaga. Having watched it for a few days though, I've come to the conclusion there's just not enough interest or volume in this stock right now to justify messing with it.  We're at a break-even or so right now. I suggest just scaling out completely. O'Charley's Inc. (CHUX) - This is a prime example of what I meant when I said you should take profits when the opportunity presents itself whether we tell you to or not. CHUX bolted up to the mid-$8.00 range on Tuesday after earnings news came out, and managed to stay there - surprisingly - on Wednesday. Between the bullish gap and being overbought though, I think it's time to lock in the 36.7% gain. I recommend you exit your CHUX trade at any price above $8.00, as soon as possible. If you really like the idea as a long-termer, buy it back after a dip.