It makes for great headlines, as mainstream media tells everyone about the S&P 500 ’s impressive run. For the first quarter of 2012, the S&P 500 rose 12%. The S&P 500 is now just seven percent away from its all-time high. As I’ve been writing, this rise has come without the participation of the retail investor, which is us, dear reader. Now, historically, it is always the retail investor that participates last in the bear stock market rally trap, before Phase III of a bear market takes hold and drives stocks lower. So I urge my dear readers to heed this warning. The retail investor was severely burned in 2008, which is why he/she is hesitant to jump back into this stock market rally and the S&P 500. What usually happens is that, as the S&P 500 continues to rise, the retail investor believes he/she is missing out on a great opportunity to earn high returns, and so finally capitulates and buys, at the worst possible time. As I’ve been highlighting on these pages day after day, the economic reports that have been released recently are not as rosy as the headlines would suggest. The housing recovery has still not materialized. The average American’s real disposable income has not appreciated—as a matter of fact, real disposable income is falling—which means that the consumer, which is 70% of the U.S. economy, is not able to spend. The jobs numbers have been somewhat stronger, but most of the jobs created recently are low-paying, while the labor participation rate—those aged 16-64 that are actively engaged in the U.S. labor market—remains at 30-year lows. People have given up looking for work! Add to this the fact that gas prices remain stubbornly high and U.S. manufacturing is still weak, and this makes it harder to build a case for the S&P 500 to continue its climb higher. As if the U.S. didn’t have enough to handle with its own economic problems, Europe is in a recession and China—along with many parts of Asia—is slowing down as well. That slowdown has been accelerating in 2012, which will provide another hurdle for the S&P 500 and this stock market rally to jump in order to reach record highs. This is a classic bear trap, where the stock market and the S&P 500 appreciate, while the economic fundamentals continue to deteriorate. As history has shown, eventually, the S&P 500 and the stock market always reflect the economic fundamentals. The strong stock market rally of this year feels like the calm before the storm, which is what I believe it is. I continue to believe that the stock market rally, which began in March of …