Markets 11-19-10

Markets have been bouncing around the past 5 days. Great day yesterday in Equity, very lousy day Tuesday. Yesterday the Philadelphia ISM index showed a marked increase in manufacturing activity and the market soared. Problem is with one chart I have been following - inventory buildup. While manufacturing countrywide has been increasing, buildup of inventories, as shown in the chart below,  has been outstripping new Orders. This does not bode well for continued recovery from the recession. Global problems are also coming back to the forefront with Ireland failing and will most probably be bailed out. Spain or Italy should be next to hit the news. Biggest global problem is China which now rules the world. China is tightening its financial system and will likely raise rates to slow inflationary forces.
So I am continuing with orderly pullback in allocations to Equity and also Fixed investments. Raising cash levels dramatically. I much prefer to forego some more upside gains to avoid the growing downside risks.