My proprietary analytics provide key levels that help me project the upside potential and downside risk for the Dow Industrials and S&P 500. Both the Dow and S&P are positive but overbought on their weekly charts, and they began this week straddling key monthly pivots at 13,506 on the Dow and 1468.0 S&P. The S&P 500 tested 1468.0 at last week high, but did not end the week above that level. On Tuesday Dow Industrials closed below 13,506, but the important close is on Friday. Weekly closes above 1468.0 S&P targets quarterly and annual risky levels at 1513.3 and 1562.9 which are both below the October 2007 high at 1576.06. In this scenario strength on the Dow can stretch to its annual and quarter risky levels at 14,032 and 14,192, also shy of its October 2007 high at 14,198.10. It's tough to justify new long positions with this limited upside potential. Weekly closes below 13,506 on Dow Industrials indicate risk to my annual value level at 1363.2 on the S&P 500 then below that is risk to my annual value level at 12,312 on the Dow Industrial Average. This risk/reward is not favorable, so the better strategy is to take some money off the table by booking profits and raising cash to at least 50%. Over the past few weeks my stock market diagnosis has been that the market is catching what I call "QE fatigue." Under this contagion earnings warnings and weaker than expected economic data begin to offset "QE hype" where momentum for stocks continue to reach new all-time, multi-year or 2012 highs. On Sept. 21 I wrote QE Fatigue Plagues Transports, May Be Contagious as the Dow Transportation Average plunged 5.8% that week. On September 28 I wrote QE Fatigue Spreads from Transports to Semiconductors as the SOX gapped below its 50-day and 200-day simple moving averages. As we entered the third quarter earnings season on October 5 I wrote 'QE Hype' and 'QE Fatigue' Tug of War Continues where I discussed the potential spreading of "QE fatigue" to three sectors: industrial products, oils-energy and basic industries in these stories. The key this earnings season is the revenue line as major companies have the accounting flexible to meet or beat EPS estimates, but the slower economy makes it more difficult to beat on the bottom line. Another focus is earning guidance relative to the weakening global economies, the pending fiscal cliff, and election uncertainties.