Thomas Kempis said, “The loftier the building, the deeper must the foundation be laid.”

More than 600 years the words couldn’t be any truer when applied to stock rallies.

Rallies have historically been built on foundations of improving earnings, widening margins, innovation, and economic growth. They are fundamental, solid, and deep foundations. As the foundation grew stronger, the higher valuations could be supported.

The current rally has been built on none of those. It has been built on cheap money – the weakest foundation of all.

Most investors at this point know it will end. They’re right too. Stocks will be fundamentally revalued at some point 20% to 30% below where they are right now.

Lately, there has been some serious shaking of the rally’s foundation and with the end of QE2 just weeks away, we’re seeing a few clues into the market’s next move.

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By Andrew Mickey, Q1 Publishing

Let the fear-mongering begin.

The debt ceiling debate has been positioned as a lose/lose situation.

Some claim a failure to increase the debt ceiling will lead to near-term financial Armageddon. They say the U.S. government can’t cut spending now. Deep cuts would kill the economic recovery.

Others predict increasing the debt ceiling will show the U.S. is not serious about its debt and will lead to financial Armageddon. They say additional spending cuts are necessary and not-as-big government, less regulation, and more entrepreneurialism will lead to a true recovery.

The debate will surely make for some interesting political theater. But from an investment perspective, all we have to do is look at recent history to see how this debate will play out and whether an economic boom or doom will follow.

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Reports of $5-plus gas popping up across the country are a major distraction.

Most consumers are reminded a couple times a week how high gas prices are. The media highlights them every day. They always get a lot of attention.

High prices at the pump, however, are normally more of a distraction than anything else. The most recent run-up is no different.

Right now they’re masking a much bigger energy crunch. And they’re distracting many investors from one of the last remaining undervalued sectors which still offers high current income, low-risk deep values, and that likely will be great place to hide safely from this correction turns out to be the big one we’ve been expecting.

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The odds of a long-awaited precious metals correction increased this week.

Gold and silver have been setting new high after new high. Gold is up $100 and silver’s up more than $10 since President Obama ruled out significant spending cuts in his mid-April budget speech and the Fed chairman noted inflation will be “transitory.”

The strong uptrend, however, showed its first signs of weakness in months this week. Gold has fallen for three straight days and silver is down nearly 20% from its highs.

If the downswing continues, it could be enough to send the hot money crowd running for the exits and set off a long-awaited (and healthy) correction.

It’s time like these, when pundits are itching declare the bubble over and emotions can quickly overcome rational decisions, the best move is to revisit what it’s going to take to pop the emerging gold bubble.

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What’s the best move to make right now?

Stocks are up 9% in four months.

The P/E ratio of the S&P 500 is just shy of 25. That’s right in between the 1929 and 1987 highs - both of which preceded crashes

Bonds, yielding anywhere from 1% to 10% depending on quality, offer have huge risks and not much reward.

Meanwhile, a recent Gallup survey revealed 55% of Americans felt the U.S. was in a recession. More than half of those felt we were in a depression.

The combination is inherently risky. The “easy” money has been made. But a one big signal this week is showing where one opportunity is likely hiding.

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