• Enjoy the weekend.

Thanks so much for reading my diary this week.

And enjoy the weekend!

TGIF!

• Never short an equity whose short interest exceeds 7% of the outstanding float or three days of volume.

Sears Holdings' (SHLD) share price action today (+$7) (and its strong year-to-date performance (+135%)) are examples of why I have basic tenets on short selling.

Among my rules is that I will never short an equity whose short interest exceeds 7% of the outstanding float.

In the case of Sears Holdings, there are 106 million shares outstanding, but the float (non-insider shares owned by the public) is only 40.8 million shares.

There are 13.15 million shares short, representing 32.5% of the float.

This is a nonstarter to me and why I have never shorted Sears Holdings.

Another principle I have with regard to shorting is that I never short a stock whose short interest is over three days of volume.

In the case of Sears Holdings, the average daily trading volume (over the past three months) is 2.25 million shares. The 13.15 million shares short represent about 6x average daily trading volume. Again this is a nonstarter.

If you must short a stock with a high short interest relative to the company's float, elect to buy puts and define your risk.

Otherwise, shorting heavily shorted stocks can be harmful to your investment and financial well-being.

I know, I have the scars to go with that experience!

• Run, don't walk, to read Alan "Chris' Oldest Brother" Farley's thoughtful analysis, "Identifying the Rally Killers."

He captures a bunch of factors that I have mentioned, but with more precision and focus!

• She called my attention to the Russell 2000's relative weakness, and I shorted IWM.

Once again, Divine Ms. M. comes to Dougie's rescue.

As The Divine Ms. M. has been writing, the iShares Russell 2000 Index Fund (IWM) continues to breakdown relative to the other indices.

She called my attention to its relative weakness a few days ago and I shorted the index ETF.

• After this week's sharp rise, it seem like a prudent trade.

As I mentioned on "Fast Money" on Wednesday night, I have been looking for an entry point to short Goldman Sachs (GS).

After this week's sharp rise, Goldman appears ripe to short, and I have initiated a short position today.

• I am pressing this bet against retail.

I am pressing my short in Market Vectors Retail ETF (RTH) now.

• BofA does Goldman one better.

Continuing the slowing growth theme on my Diary, Brother Bank of America/Mother Merrill cuts 1Q2012 real GDP forecast to +1.8% (even below Goldman's forecast now).

Will ECRI's Laskhsman Achuthan be correct in his forecast after all?

• Consistent with the concerns I have expressed throughout the week, ISI's retail surveys indicate that retail sales have slowed down in the week ending today after a strong February.

The ISI broadline survey dropped to 45.8 from 51.3 while the ISI specialty retailers survey declined to 50.7 from 54.3. The average of the two ISI surveys declined to 48.3 from 52.8.

I am short Retail HOLDRS (RTH) and a number of discretionary consumer stocks.

• The remarkable run of MagicJack

"Don't hang up (no, no),

Oh, don't you do it now,

Don't hang up (no, no).

Don't hang up like you always do.

I know you think our love is true.

I'll explain the facts to you, don't hang up.

Give me a chance or our romance is through. "

 - The Orlons, Dont Hang Up

A long time favorite, MagicJack VocalTec (CALL), discussed back in November, 2011, has had a remarkable run in doubling since then and is up by nearly 10% today. (Jim "El Capitan" Cramer was asked about the company in a Lightning Round on "Mad Money" this week). 

Here is the six month chart.

Despite the share price advance I would not be hanging up on this CALL yet!

• International Flavors & Fragrances and PepsiCo remain out of favor. I buy.

I continue to buy two out-of-favor consumer staples, International Flavors & Fragrances (IFF) and PepsiCo (PEP).

• So you know.

I am still short Apple (AAPL).

• Run, don't walk, to read Timothy Geithner's op-ed in The Wall Street Journal.

Tim Geithner's op-ed in The Wall Street Journal, "Financial Crisis Amnesia," is getting a lot of press today.

• Run, don't walk, to read the lates 'Ask Noah' column over on our flagship site.

Run, don't walk, to read the latest "Ask Noah" column on TheStreet, "Staying True to Your Father."

The question Noah answers is a good one:

My father taught me a lot regarding finance. His voice constantly guides my choices at work. Lately, my own financial instincts differ from his traditional, safe thinking. I feel anxious because I've always followed his lead and have respect for his teachings. Can I get tips on both following my gut and utilizing what he taught me?

• Robert Prechter delivers some dire market warnings.

Drivin' that train

High on cocaine

Casey Jones you better

Watch your speed

Trouble ahead

Trouble behind

And you know that notion

Just crossed my mind.

-- Grateful Dead, "Casey Jones"

In this video, Robert Prechter delivers some dire market warnings -- the S&P 500 will breach the 2009 lows in the next few years! -- based on many of the technical divergences that I have mentioned this week, including low volume, weakening breadth in the NBA (nothing but Apple (AAPL)) and a potential DJIA sell signal (decline in transportation index)).

While Prechter's view is outlandish, it always pays to listen to all voices.

• Try to ignore the breathless bullishness, and look at the facts.

Even through the darkest phase

Be it thick or thin,

Always someone marches brave

Here beneath my skin.

Constant craving

Has always been.

Maybe a great magnet pulls

All souls towards truth.

Or maybe it is life itself

That feeds wisdom

To its youth.

-- k.d. lang and Ben Mink, "Constant Craving"

A bullish magnet has pulled Mr. Market in a northerly direction and has produced an almost constant craving for equities this year. As I wrote earlier this week, it's as if doubt and fear have been driven from Wall Street.

Only three of the 30-plus stocks I own -- see the most recent "Levels I Would Buy" column -- are in buyable territory: An attractive entry price that provides favorable returns compared to risk should be important for every investor and trader. For, as Warren Buffett writes, "Price is what you pay, but value is what you get."

Since the Generational Low of 2009, the S&P 500 index has moved from 666 to 1380, and it remains my view that most of the positive macroeconomic data have now been more than fully discounted at current valuations. My "fair market value" calculation for the S&P is around 1345 -- so we are now in the overshoot area.

There is nothing average about this economic cycle.

I, for one, am not willing to pay nearly 14x (close to the historic average of 15x) for earnings when profit margins are at 57-year highs and are vulnerable in a likely setting of rising costs (especially of an oil-kind).

On top of the fiscal imbalances (that are not being addressed and that our country faces), there remain substantive economic, political and geopolitical problems aplenty that represent challenges to economic growth and market valuations.

Besides the aforementioned secular headwinds, there remain ample near-term economic issues, both here and abroad, that go beyond a developing recession in Europe.

1. The U.S. Economy: On Tuesday, the durable goods reports materially disappointed relative to expectations, falling by 4% (the largest drop in three years). Core capital goods, considered a good barometer of capital spending, declined by a greater amount (4.5%), for the steepest decline in over a year. This result indicates that there was pull-forward of capital spending in 2011 owing to the 100% tax credit available (which expired on Dec. 31, 2011).

On Thursday, the government reported that January personal income rose 0.3%, well below the consensus estimate of 0.5%, and spending was up only 0.2%, less than half the forecast. As a result of 0.2% personal consumption inflation (Bernanke's favorite measure of inflation), real income was up by only 0.1% and actually dropped by 0.1% as measured by after-tax disposable income. Meanwhile, real spending was flat.

Yesterday's 52.4 ISM reading for February was the first drop since October 2011, and it was a large disappointment relative to expectations of 54.5.

January construction spending also disappointed, dropping 0.1% (month over month); estimates were looking for a gain of 1%.

Meanwhile the price of oil -- now at nearly $110 a barrel -- poses a threat to forward economic conditions.

I would note that as a direct result of these (and other) reports, Goldman Sachs reduced its first-quarter 2012 GDP forecast twice on Thursday, to under a 2.0% growth rate.

2. The China Economy: A mixed picture was delivered on Wednesday night, as the HSBC February Manufacturing PMI (more geared toward medium-sized corporations) came in at a weak 49.6 while the government's PMI (more geared toward surveying the country's largest corporations) was an in-line 51.0. (It remains unclear whether China's landing will be "soft" or "hard.")

The bulls I know suggest that the above is too much parsing of the data or negative data mining. By contrast, I call it reality.

As Grandma Koufax (a brilliant investor well before it was fashionable and commonplace among her peers) used to tell me after big market runs, "Dougie, much can go wrong. Some can go right."

I have seen this sort of relentless buying and, arguably, developing complacency, more times than I can count over the past three decades. But as the wise man once said, "This too shall pass."

Remember this as the commentary in the business media grows more and more breathless as "levels" are breached to the upside this week. And, most important, remember it's not their money.

It's yours.