Market Topping - The Bull's Logic

Bullishness in the market has never been so high since late April of this year.  The Fed has repeatedly come out and assured people that they will intervene with QE2 if necessary and the investor public sees this as a good thing and bids stock prices up.  What's funny is investors are eyeing the weekly jobs report with the following rationale:

• If the jobs report is better than expected, then the economy is recovering and we can be optimistic and buy stocks.
• If the jobs report is worse than expected, then Bernanke will implement QE2 and this will be bullish for stocks and gold.

When the market gets to this level of optimism where nothing can go wrong and no matter what happens, we go higher, that usually is indicative of a top in the market. Also, bullish sentiment is near late April 2010 sentiment, volume continues to be weak, and we are at the top end of our trading channel, and quite near resistance.  All highly suggestive of a top in the market.

We are days if not hours away from a big (probably steep) correction in the market.  We might make one more stab upwards in anticipation of the jobs report, but any rally at this point is a fantastic opportunity to go short.

We are about to enter "minor wave 3" down, and that means the sell-off at the very least must breach the lows of the end of wave 1, approximately 1010 on the S&P 500. In all likelihood, we will at least sell off to 9400 DOW before the end of wave 3.  Of course, it won't be a straight line down, but that is the next big target before we have a significant rally.