The second quarter and the first half of the year ended today to the loud cheers of the bulls. They may have lost the day but they feel like the battle is won. After the bears came out on top in the first quarter, the bulls have now tied it up. So what's next?

With the VIX declining and high beta stocks (the Russell and the Nasdaq) outperforming, it doesn't appear that the rally is over just yet. It's been struggling for sure, but remember what I said...a market that doesn't go down goes up.

I'm favoring a little more weakness and then a move higher based on the above mentioned and a few other reasons I have. But it's not a slam dunk.

One thing I've been watching is the HGX, the housing index ETF. This index topped WAY before the overall market, giving us a great warning by our largest and most important asset class that things were about to turn nasty. NOW look at it. It's not leading. In fact I'd say it's showing relative weakness...still.

Perhaps this is simply a concern for the longer term and won't affect a third quarter rally. At the least I'd consider it a warning that real estate hasn't bottomed, and maybe isn't even close to one. Until that happens I don't think the economy or the markets can be considered to have put in a firm bottom either.

But as the market still hasn't retraced even 38.6% of the overall decline, I'm prepared to allow it the chance to do so. If it can't, it may be lights out.

We should get a lot of answers this quarter as there are certainly lots of questions. I for one am looking forward to it.