The markets are hovering around their highs, chopping back and forth in a narrow trading range. As I said last week, buying into an extended market is a loser's game and one I'm not going to play. It's a pity, because you get nice tight spreads when trading the indices. Still, 'defence comes before offence', as my transatlantic brethren like to say.

Yahoo hit another 52week low last week, which is great for shorts like me. I added to my position on Monday, shorting at $25.50 (the price has been having difficulty surmounting this point). Acting so weak in such a strong market does not bode well for Yahoo. The company had tried to buy video site YouTube (the 'next big thing', luddites should know) a few weeks ago but Google stepped in and beat them to it. People write pages about what this means for the two companies but why bother?

Google went up, Yahoo went down, just as it's been going down for some time now. That tells me the market's take on things.

Waffling on about such matters is for people with too much time on their hands.

Anyway, I got rid of Monday's position at $24 two days later. Ordinarily, I'd have taken a partial, but I'm still short from the position initiated a fortnight ago. This trade gave me the best part of 500. The initial short position has contributed another 600 or so to Market Monkey's coffers.

Thank you, Yahoo. Please continue to cock up.

I might take a few more quid off the table soon, seeing as earnings are due next week. To be honest , I'd be shocked if there were any upside surprises announced. The company has already warned of a 'soft' quarter so mediocre results can be expected.

Still, only a really eager beaver would rush in now and get short. The market is expecting awful results, so a disappointment is already reflected in the price.

My only other recent trade was a long entry on Amazon's breakout past $33, a level of significant technical interest. It didn't follow through so I closed at a small loss. With these type of trades, you want to be in profit from the very beginning. Amazon remains around the $33 level, but the expected momentum never materialised. In such cases, it's safer to get out.

What about Aer Lingus? I never trade new issues because there is no price history to go on, but it's obvious I should have made an exception here. All the whining over the Eircom IPO (I'm sorry, I find it hard to feel sorry for people presented, as Eircom shareholders were, with a 20% profit after one day's trading) guaranteed that this one would be underpriced. Add in a minister with a knack for getting things bizarrely wrong and you've got a low-risk trade.

Someone told me that Aer Lingus has a cash pile of 1bn (if that figure is wrong, blame my friend instead of me), which meant that the flotation price of 1.2bn was chicken feed. For all those who bought into the IPO, congrats . . . quite a killing.

Where's the market heading from here? It seems to me that things are almost priced to perfection.

Earnings season has begun.

Most companies report in a fortnight's time but a lot of reports will be spilling out in the meantime. With the market up 10% since midJuly, lots of people are just looking for an excuse to sell.

Up-trending stocks that disappoint (or simply match rather than exceed expectations) should get hammered. With the market as a whole, however, buying on weakness is likely. I'd love a couple of decent-sized down days to set up some long entries and relieve the snooze factor.

Incidentally, what's been notable about this market rally is the level of scepticism that has surrounded it. Last week, when new multi-year highs were set, the web was awash with traders screaming that it didn't make sense. The level of shares being shorted on the Nasdaq last month hit a record high.

Sentiment surveys show a degree of bearishness that's unusual in such a strong market.

What does this translate into? In the long run, higher prices. It shows that a lot of potential money remains on the sidelines. Bull markets end when everyone has already put their money to work. That's not the case here.

I'll be disappointed if those higher prices come soon, however.

A correction is badly overdue, at least for me . . . I'm itching to trade. I had expected to be entering multiple positions every week and these kind of lethargic periods aren't what I had in mind. Still, there has to be a reason for every trade. Last week was a quiet but profitable one.

That's what counts.

Weekly gain/loss: + 700 Overall balance: 28,100