Reverting to the Mean

A startling number of the financial instruments I track each day are nearing resistance levels that could trigger a large-scale downdraft in the major indices. While there's little evidence of an impending turn in the current uptrend -- at least not yet -- the sheer bulk of these mini-signals could be flagging tougher times in the weeks ahead.

The proximity of major resistance demands a more cautious approach by shareholders who have "loaded up" in the last few weeks. First, tighten your stops to protect recent gains. Second, raise cash by dumping underperforming issues and taking partial profits on open positions. Third, shift a chunk of capital into stocks and sectors that have room to run in a weaker market environment.

At the top of my worry list, the S&P 500 index futures are now trading just under the February swing high near 875. This level has stood out as a technical target since the recovery began in early March. The Nasdaq 100 futures contract is nearing its own line in the sand, closing Tuesday's session less than 70 points under the 200-day moving average.

Apple (AAPL) -- Daily eSignal

Scanning through my watch lists, rallies into resistance are prevalent across many sectors and trading venues. Just check out Apple (AAPL), which has now entered the massive Sept. 29 gap. In technical terms, the filling of a big down gap is bearish because the fill level, near $125 in this case, will trigger a host of fresh sell signals.