As the market continues to waggle back and forth around the upper end of its trading range, the mantra for the day is "caution". With everyone waiting around for the final rally portion of the year-end rally, I am beginning to believe that the easy money has already been made.

So, as we wait around for the markets final act, let痴 go over a few scenarios that could possibly carry the market to higher highs.

1) Energy Prices Collapse: What are the odds? Winter is among us; surely it will remain cold or get colder as winter wears on. If this is true, why would energy prices suffer a significant pullback? Sure, the recent drop in gasoline prices have helped a little, but $2.00 per gallon to someone who owns a Tahoe or Suburban is still a chunk of change.

Conclusion: Energy prices are not going to collapse anytime soon.

2) Retail Sales Spike to the Upside: Retailers are giving away the store to move merchandise. We have all heard the recent sales figures. But, what we need to keep in mind is many retailers have lowered prices so much that profit margins will be low.

As an example, clothing retailer, Aeropostle (ARO) received high marks from analysts for their "Black Friday" sales gimmick. What was it? They marked down everything in the store 50%. Sales associates were instructed to yell, "50% off of everything in the store" as shoppers walk by their store in the mall. On the surface this seems like a great idea, but when I heard the news, the first thing I thought was, "this is an act of desperation".

Conclusion: While pockets of the retail space may do well (BBY &WMT), other retailers may suffer as earnings are released in January and February. Why? Sales may have increased, but profit margins will erode.

If you can wait a few months (3-6), shorting the Retail Holders (RTH) may not be a bad idea.

3) End of the Rate Hikes: If the Fed is actually at the end of its tightening cycle, the market may celebrate with an explosive rally. In fact, I believe the majority of the rally we have just witnessed was in anticipation of this news.

The Fed (normally) will stop raising rates when the economy cools and inflation is under control. If the Fed does stop soon, then the great economy that Donald Evans was talking about this morning (see my earlier post) does not exist. The Fed is not going to stop raising rates when the economy is going gangbusters, it will stop when the economy is slow or slowing.

Conclusion: So far, the economy does not look as if it has cooled enough to prevent further rate hikes. Unless we begin to see signs of a slowdown in the economy, the current market advance is running on fumes. This does not mean it cannot fly higher, it can. The market will be very disappointed if the Fed doesn't say that the economy has slowed enough to warrant an end to the rate hikes.