It has been six months since the Dow last traded at 11,258.  This level (the high of 26 Apr 2010) turned out to be the high point at the end of a year-long rally before the Dow fell back to establish an initial 9869-11258 trading range.

The bottom of this trading range was tested 3 times before a solid low was established in early July (9614 on 2 July 2010).  Since then the Dow has rallied to within 11 points of its 11,258 high.  The S&P has been halted by its 200-week moving average (currently 1193), a little shy of its April 1219 high.

Sensible long-term investors should take advantage of the indices currently trading near important resistance levels to take some profits and top-slice their holdings to protect against the indices falling back once more to the low end of their trading ranges.  Sectors which have performed well recently (and are therefore candidates for profit-taking) include mining, food retail, telecoms and utilities.  Whilst there is usually a seasonal rally at this time of the year which lasts through to the spring, nothing is guaranteed in the markets.

The Fed is due to announce a renewed Quantitative Easing program on 3 Nov 2010 and how fund managers decide to respond to the size and composition of this QE2 initiative will determine whether stockmarkets rally into the year-end or not.

The bigger picture roadmap given by the Anatomy of a Secular Bear Market calls for an extended period of range trading once such a trading range is established, lasting for several years in the case of the 1966-1982 secular bear market.  During that particular secular bear market, each time the stockmarket neared the top of its trading range, taking profits proved to be the correct course of action for long-term investors.