Are the markets topping soon

Newsweek released a publication stating the recession is over. Pundits are talking about a new bull market and GS gave a target of SPX1000 as well as upgrading GE yesterday. GE shares rose, was up 9% intraday.

On the contrary, I have my doubts. Filtering out all the noise from CNBC, newspapers and TV shows, and plainly looking at charts and sentiment.

As the market retrace approximately 50% (target for the end of this bear rally around SPX 1121), caution is warranted at this juncture. Looking at the weekly charts, the SPX is tracing out a perfect ABC from March lows. We should be in major C wave of Primary B now, once this C wave is over, the entire ABC (Primary B) should end as well, marking the top. At SPX 997, negative divergences are starting to appear on all timeframes. There are 2 probabilites here.

1. The 5 impulse waves off the July 869 low is Intermediate wave A of Major wave C of Primary B. After a zigzag intermediate wave B correction, Intermediate wave C will bring the indexes to new highs, targetting SPX1121.

2. A truncated Intermediate wave A of Major wave C of Primary wave B ends the bear rally.

In both situations, another downtrend will occur to end this bear market (Primary A 1576-666, Primary B 666-? (target 1121), Primary C 1121 - ?)

We are now 5 months into this correction. If comparing this bear to a similar 1929-1932 supercycle degree bear which also retraces approximately 50% of its A wave in 5 months duration. And thereafter, it finished the bear in a devasting C wave.

Another indicator of a top will be public sentiment. Bullishness should akin to that of Oct 07 top, with media declaring a new recovery/bottom etc. Watch GS as well. Remember last year when GS announced a target of US$150-200/barrel oil ?? Soon after, oil hits US$140 and it fell thereafter.

VIX which represents volatility is also showing positive divergence. Once its MACD turns positive and it breaks out of its wedge, volatile times should return again.

Also of particular concern are the oil and precious metal markets. They bottomed in Oct/November, months before US indexes bottomed in March. They have since marked the top in June 09, with oil forming a double top. Even with the SPX and DOW making new highs recently, oil is not conforming. This is intermarket bearish divergence.

For Asia markets, they made their temporary bottom in Nov 2008. The Shanghai Composite Index has met its major resistance and dropped 5% 2 days ago. Though it seems like a change of trend, we need to monitor for a couple of days more to confirm if thats indeed the top. There seems to be a shift in the balance of power, or market leader. Asia and Commodities markets bottomed first before US or Europe. And if they now mark the top first, this would probably mean that Asia will lead the recovery first after the final bottom is made.

By then, fear will be everywhere in the global markets and there will be no bulls around. Thats the time to cast your fears aside, step in and BUY. I believe after the final bottom is made, US markets will be quite stagnant for awhile, hence a L shape recovery. Asia could be different. This transfer of the balance of economic power could perhaps be the major theme in this bear market.
With all these reasons, its now perhaps time to load puts or pile up on shorts and exit longs as we prepare ourselves for the next Wave C. The big bad one.