This holiday-shortened week saw a relief rally that began on Monday and carried through until Thursday. The markets still have further to go in the coming week before we once again reach the top of this four month long trading range.

The question that haunts both bulls and bears is when and in what direction will the markets finally break out or break down? As readers are aware, I believe that there is a high probability that stocks will do both in the weeks ahead. We could easily see the S&P 500 Index, for example, reach a new high, possibly 1,900 or beyond.

However, at some point this spring, that index and others will rollover. The resulting decline will be nasty, scary and absolutely meaningless in terms of this 2014's full-year returns. But the trading range will be broken on the downside, as a result. How bad could it get?

Let’s say the S&P 500 Index begins to rollover at 1,900. A 10 percent decline (190 points) would put the average at 1,710. A 15 percent sell-off would equal 1,615. That would simply put us back to the levels we enjoyed in October of last year.

Readers may recall that back then the Fed was still talking about tapering, although it wouldn't be until January that the Fed would begin to cut back on stimulus. Market commentators were warning that the market was overheated and due for a big pullback. Investors earlier that month were concerned that the government would be shut down (it was) and we would default on our debt. Job gains were modest at best and the strength of the economy was a question mark. Pimco's Bill Gross was writing that all risk assets were priced artificially high.

The point of this recent history in hindsight is that dropping 15 percent would only return us to a level where investors thought the markets were too high anyway. Since then, of course, many changes have occurred and all of them positive. Employment and the economy are showing great gains. Corporate earnings have increased. The political stalemate in Washington has at least quieted down. And the Fed has begun to taper but, contrary to popular opinion, interest rates have not sky rocketed.

Times change, however, since then we have risen almost 20 percent in six months. Seasonally we are not in October, but moving instead into spring. That is usually a down period in the markets (sell in May and go away) compounded this year by the mid-term election cycle (also a bad time for markets historically). We have not had a 10 percent correction in over two years — a market anomaly. Bottom line: we are set up for a pullback, but exactly when it occurs is a question no one can answer with any accuracy.

So far, the markets are following my playbook practically page by page. Stocks bounced off their lows on Friday and started this week in rally mood. The technology-heavy NASDAQ led the charge upward with the other averages following. At its low, NASDAQ had dropped almost 10 percent.

The last two weeks of April have been pretty good for the markets historically. All the tax selling is now out of the way and investors are re-establishing positions in various stocks. Chances are that we should re-test the recent highs and do so quickly. Hold on to your hats.

Bill Schmick is registered as an investment adviser representative with Berkshire Money Management. Bill’s forecasts and opinions are purely his own. None of the information presented here should be construed as an endorsement of BMM or a solicitation to become a client of BMM. Direct inquires to Bill at 1-888-232-6072 (toll free) or email him at Bill@afewdollarsmore.com.

This Friday the stock and bond markets will be closed to commemorate the crucifixion of Jesus Christ, or so the theory goes. But that is just one of the many myths involved in this holiday and its origins remain a mystery.

The fact that the New York Stock Exchange (NYSE) has a tradition of closing on Good Friday, one of nine holidays per year, has many traders and investors scratching their heads. After all, it is not a federal holiday and plenty of other businesses are open on that day. What makes Good Friday any more important than say, Columbus Day?

There is a story that during the 1890s there were three years in a row that the market suffered big drops on Good Friday. Superstitious traders took this to be a sign from God that "Thou shalt not trade on Good Friday." There is no evidence that is true. The Exchange was open for trading during Good Friday on three separate years (1898, 1906 and 1907). However, when the exchange did open for business in those years, the market was up two of those three Good Friday dates.

Another fable that many believe was that the market suffered through a Black Friday market crash in 1869. As a result, the Board of Governors of the Exchange swore never to open again on Good Friday. That seems a little hard to believe, since records indicate the exchange was closing on Good Friday as far back as 1864.

Art Cashin, the renowned trader at UBS, says there never was a stock market crash in 1869 but there was a crash in the gold markets back in September of that year. Easter week, however, is in April, not September, so go figure.

Although Good Friday is not a federal holiday, many states do recognize it as a state holiday with local governments, banks and other institutions closed this Friday. As a result, trading volumes are smaller, since fewer potential players are at work.  Businesses that normally stay open on Easter Sunday also tend to close on Good Friday so that their employees get a day off to compensate for working on Sunday.

Some think that the holiday was a nod to Jewish and Christian traders looking for a day off between Passover and Easter. Globally that makes some sense since already anemic trading volumes are even lower because Europe traditionally closes for Easter week. But as the original reason for this NYSE holiday, it does not square. Daily global trading is a relatively recent phenomenon on the stock exchanges.

There is some reason to believe that religion did play a role in the holiday. New York, a century ago, was the home of Irish immigrants. As such there was a preponderance of Irish Catholic officials in just about every walk of life in the city, including the NYSE. It is plausible that those officials could have lobbied for the closing of markets during this important Catholic holiday.  But no one can prove it.

So the origins of this stock exchange holiday remain mired in mystery. It is just one of the many quirky twists that amused and confuse Wall Street on slow holiday weeks. Whatever the reason, Friday is a day off for me, but never fear; I'll still be writing your market column as usual.

Bill Schmick is registered as an investment adviser representative with Berkshire Money Management. Bill’s forecasts and opinions are purely his own. None of the information presented here should be construed as an endorsement of BMM or a solicitation to become a client of BMM. Direct inquires to Bill at 1-888-232-6072 (toll free) or email him at Bill@afewdollarsmore.com.

As spring finally arrives throughout the country, you would think the stock market would celebrate, but not this year. The indexes were slammed again this week and we can expect more of the same in the months ahead.

By now, if you have been following my advice, you have already raised some cash by selling your most aggressive equity holdings. How much cash you hold is up to you. However, before you sell more, remember, that this sell-off is only a temporary state of affairs. By the fall, you want to be fully invested once again.

In the meantime, don't expect the stock market to simply drop like a stone. What I expect is a series of lower highs and lower lows. That process is beginning to unfold right now. So far this week, we have about a 3 percent decline in the S&P 500 Index. The tech-heavy NASDAQ has had a far greater decline, dropping that much in a day.

Momentum and biotech stocks have been the name of the game since the beginning of the year. While the overall markets simply vacillated up and down over the last three months, those stocks were winners with some names gaining 30-50 percent. Most of those companies are traded on the NASDAQ. Now that the markets are pulling back, it is those same stocks which are leading us lower.

When I first warned investors of a coming sell-off, I mentioned the over-heated initial public offering market (IPO) as one clear early-warning sign that the markets had risk. I noticed that this week, which was billed as the busiest public offering week since 2007, actually flopped.

Only three out of seven new companies actually made it to market, while the others postponed due to market conditions.

By now, most of my readers (and clients) have become accustomed to volatile markets.

Many of you lived through the devastating declines in 2008-2009. We endured together several major declines together since then. We suffered through periods when the markets were going up and down 1 percent or more per day, so what we face this spring and summer should be small potatoes to you.

Those trials and tribulations have seasoned you. As veteran investors, you can live through this decline. You realize that this too shall pass. The key in the months ahead is to maintain your composure, resist making emotional decisions and, if you still have not raised some cash, I want you to do so as the market once again climbs to (and possibly breaks) the old highs.

My suggestions would be to sell small or mid-cap stocks or funds. Large cap growth funds are also a good idea, but resist the urge to just sell everything. Markets can be a quirky lot. The past has taught us that stocks can turn on a dime and if you don’t have skin in the game when they turn, you stand to lose quite a bit.

Sure, I'm looking for a 10-15 percent  decline, but what if stocks reverse and go higher before that? In October  2011, the stock market gained 9 percent in just seven business days. By the time some investors got the courage to get back in the markets had erased almost half their decline.

That's why you play the percentages when investing.

Bill Schmick is registered as an investment adviser representative with Berkshire Money Management. Bill’s forecasts and opinions are purely his own. None of the information presented here should be construed as an endorsement of BMM or a solicitation to become a client of BMM. Direct inquires to Bill at 1-888-232-6072 (toll free) or email him at Bill@afewdollarsmore.com.

This week the eighth largest U.S. banks were told they need to increase capital by about $68 billion. In some ways it is too little, too late in the government's efforts to prevent another financial meltdown. Nonetheless, the regulations do provide an increased level of safety for taxpayers.

"Too big to fail" is a term that makes most of us grind our teeth. It was taxpayers, after all, who were required to pay trillions of dollars to rescue our financial sector after the 2008-2009 financial crisis precipitated by our largest banks. Ever since then, regulators have been looking at ways to prevent the same thing happening again.

Now, over five years later and despite massive lobbying efforts by these same banks, this week the Federal Deposit Insurance Corp., the Federal Reserve and the comptroller of the currency approved rules that would raise the ratio of capital required as percentage of total assets to 6 percent at our country's largest banks. That would require the top eight banks to raise an estimated $68 billion in capital by either selling off parts of their businesses or raising equity via the stock market.

The idea behind raising capital levels is simple. The more capital an institution has to put up in order to participate in a risky trade, the less profit they make. In the past, banks could borrow or leverage their existing capital through derivatives or short-term funds called "repos" and buy or sell things like credit default swaps, collateralized mortgage obligations and other exotic, poorly understood financial instruments. With little capital down, the bank's profits were tremendous — until they weren't.  The resulting house of cards they build practically buried us all.

Banks are blasting these new limits. Their spokesmen are arguing that it puts U.S. banks on an uneven playing field with their counterparts in Asia and Europe. These banks, they point out, are governed by the Basil III accord, which also takes into account both a leverage ratio and risk-based capital requirements. That Basil agreement, at 3 percent, they argue, is half the level now required for their American counterparts.

All the usual arguments have been trotted out — loss of competitiveness, less market liquidity, senseless regulations. Over-turning these rules will be the subject of intense lobbying within Washington's corridors of power. Although the lobbying will be fierce, many of these same banks have already taken steps to adjust their capital base higher. In addition, these new regulations, if approved, will only begin to take effect in 2018.

What none of the banks will say is that the old system, where banks themselves set capital levels based on their estimate of the perceived risks of their assets, failed miserably. They have also conveniently forgotten that it was neither European nor Asian banks that triggered the meltdown. It was our largest eight banks that disregarded their own risk assessments in the name of greed.

In many ways, regulating the banks at this late date is similar to closing the barn door after the horse has bolted. Still, the new rules are simple, straightforward and will make it harder for rogue traders and institutions to set off another financial Armageddon. These rules may and do create some unnecessary and nonsensical consequences such as holding large amounts of capital against safer assets like U.S. Treasury bonds. However, unfortunately, our banks have proven that they cannot regulate themselves in these areas. By their own actions, they have invited the devil, in this case, government regulators, to their door.

Bill Schmick is registered as an investment adviser representative with Berkshire Money Management. Bill’s forecasts and opinions are purely his own. None of the information presented here should be construed as an endorsement of BMM or a solicitation to become a client of BMM. Direct inquires to Bill at 1-888-232-6072 (toll free) or email him at Bill@afewdollarsmore.com.

Just about everyone on Wall Street has jumped aboard the bandwagon by now. Sure there are some that still think the market can go higher but the vast majority of investors are now expecting a major pullback. Welcome to what's called a crowded trade.

Pundits are elbowing their way into the limelight on a daily basis sounding warnings of the imminent demise of the stock market. Traders are short and investors are selling as everyone eyes the exits. It appears all we need is someone to shout "fire" for the panic to begin. I wish it were that easy.

It has been over a month since I first warned that this quarter could be problematic for stocks. I was deliberately vague on exactly when this pullback would occur because a "topping out" process takes months to unfold. By the time many equity indexes react and the general public begins to register this process, many individual company stocks could be down 20-30 or even 50 percent.

Over the past few weeks I have brought your attention to several ominous signs that this process is occurring. Usually, small caps decline first and then mid-cap stocks with large cap names the last to feel the brunt. This week I also noticed that the major decline in "momentum" stocks are starting to spread further afield. Some big names in the financial, industrial and healthcare sectors, among others, are getting hit hard.

However, remember that this is a process. All the doom and gloom-sayers of last week, who were convinced that the correction had begun, backpedaled this week. They were flummoxed when the S&P 500 index hit another record high. The NASDAQ turned on a dime and raced higher, while the Dow Jones Industrial Average came within two points of breaking its historic high. No sooner had they wiped the egg from their face when all three averages plummeted again on Friday.

Folks, this is part of the process. It is not popular or pleasant, but it is extremely volatile. As such, I would not be surprised if sometime next week, after a further decline, markets do a one-eighty and reclaim the highs. Clearly, we need this consolidation process. After all, the S&P 500 index is up 179 percent from its 2009 lows. Small cap stocks, as represented by the Russell 2000 equity index, have become more expensive than at any time since 1995.

So let's get down to the nuts and bolts. What should you do? You can sit back, ignore the drama, suffer some paper losses and come out even by sometime in the fourth quarter. Or you can raise some cash by selling some of your most aggressive investments. Wait for a reasonable decline, say 10-15 percent, and re-invest the money. Finally, if you think you are good enough: go to cash and buy back in at the lows. Good luck with that last bit of advice.

Sure, I will endeavor to tell you when that will occur but honestly, how can I accurately pick a bottom when I can't pick a top? No one can and if someone claims they can, well, read their column or invest your money with them.

Bill Schmick is registered as an investment adviser representative with Berkshire Money Management. Bill’s forecasts and opinions are purely his own. None of the information presented here should be construed as an endorsement of BMM or a solicitation to become a client of BMM. Direct inquires to Bill at 1-888-232-6072 (toll free) or email him at Bill@afewdollarsmore.com.