Hey all... Happy Friday! Hope all of you have something interesting lined up for the weekend. We've still got a little trading business to take care of before the trading week is officially over. So... Advertisement Today's Top 10 Small Cap Stocks - Dynamically Updated List This list will continuously scan and rank small cap stocks throughout the trading day. Find realtime trading opportunities using our SmartScan and Trade Triangle technology to uncover the next big stock under $10 to make major moves. View the top 10 small cap stocks for today. Advertisement Yes, I saw the market move firmly upward yesterday. Nice, wasn't it? Though stocks had actually been creeping higher for the week and a half prior, the daily bullish moves were almost immeasurable. Thursday's 1.1% made things fun again. On other hand, I have to reiterate something I said to you in Tuesday's newsletter because things are lining up pretty much the way I told you to be looking for. Specifically, I said, “I suspect we're going to have another good day or two though before things really start to get interesting… If the DOW and the S&P don't test their April highs very soon, I'm going to be very surprised. If the DOW and the S&P make new highs, that won't surprise me at all. … As a matter of fact, I'd be willing to get short the major indexes on the S&P's or the DOW's testing of recent highs or even on a breakout of a new high. Nothing is going to convince me this market is ready to roar until the NASDAQ takes charge and starts showing us that it wants to break out into new high territory.” Well, guess what? The S&P 500's high today so far is 1417.73, within striking distance of the March/April ceiling of (essentially) 1419. The Dow's high today is 13,274.89, within sight of the March/April ceiling around 13,280. And it's pretty clear there's no real follow-through from yesterday's bullishness. The NASDAQ, on the other hand, remains well under the March peak 3134.17, currently at 3069.58. At this point I can't truly say to you the S&P has to actually hit new highs in order to start a pullback. Usually it would need to, but perhaps the surge at the latter half of this week means the rally has fully run its course. The same goes for the DOW – maybe today's peak is enough flush the last of the buyers out and hand the reigns over to the sellers. I can say this to you though... I don't think there's enough near-term upside left in stocks right now to merit bothering with trying to get or stay long. Remember, all it takes to jump-start a pullback is (and yes, I get the ironic nature of this theory) the slightest brush with new-high territory. The fact that the NASDAQ Composite isn't even in a position to test its March highs only beefs up the possibility that the bigger bullish trend is nowhere near as healthy as it may seem at first glance. Bottom line? We're not saying any dip is the beginning of a full-blown bear market. As a matter of fact, we're still long-term bulls. We're just saying the short-term tide looks ripe for a dip now that the ceiling is within reach. Volume has been pathetic on the way up over the last three weeks, so there's not a lot of conviction behind the move as it stands right now. A small tumble and regroup may be exactly what the doctor ordered for stocks. Now, since we're talking about the bigger picture - and since we opened the earnings can of worms a few weeks ago - let's tie up a loose end. Earnings Now, Then, & Later In the short run, the markets are driven by technical, fear, and greed. In the long run though, the markets are driven by earnings. So, while our take above is a short-term outlook, it's still worth investing a little time in the bigger earnings picture, you know? That's my not-so-subtle segue into a review of second quarter's market wide earnings. It's interesting. While last quarter's bottom line growth for the S&P 500's companies wasn't great, it was a heck of a lot better than people thought it was going to be. To put that in numbers for you, as of the end of June, the pros expected the S&P 500's 'per share' earnings to only rise from $24.86 in Q2 of 2011 to $25.21 this year. Instead, with 92% of the market's companies having posted last quarter's numbers, the S&P 500 has actually earned $25.48. As far as beats and misses go, 64% of companies topped their estates, while 24% missed earnings targets. I'll be honest with you - it's not fantastic. The truth is a two way street though, so while last quarter's numbers may have been less than thrilling, the truth is they weren't bad either. They certainly could have been a lot worse. You know how this works, however. The past may have some influence on the market's value, but stocks mostly trade on their most plausible future-earnings forecast. What do those look like? Just to put things in perspective, the S&P 500 is on pace to earn $101.86 this year. That's respectably better than last year's $96.44…. 5.6% better, to be precise. That translates into a trailing P/E ratio of 14.3, which is on the low end of the long-term average. The forward-looking (2012) P/E is only 13.9. Now – again since I'm in an honest mood – I don't quite see how the S&P 500's going to meet its 2013 per-share profit estimate of $115.28, which would be a 13.1% improvement of this year's number. It's crazy. I think that's got a lot to do with why interest in stocks is so weak right now; it just looks like a setup for a lot of disappointment. On the other hand, at some point the fact that companies are still growing the bottom line (even if modestly) has to be more important than the likelihood of lowered and missed estimates next year. I think we're at that point. I'd rather be a long-term buyer here knowing that the bottom line is still going to dole out merely mediocre growth, rather than miss out on some gains simply because I didn't think the S&P 500 could actually reach its 2013 target … a target that most people seem to agree is ridiculously high anyway.  In other words, even if the S&P 500 'only' earns $100.00 next year, that's still worth something. That's just my two cents anyway, but I've seen this kind of thing happen over and over again. The market prices in the absolute worst-case scenario out of fear, and then what actually ends up happening is something much less frightening. Something to think about as Q2 earnings season winds down and we start prepping for the most bullish time of year.