What can you say. I warned this morning that buying the gap up probably didn't make muchsense. Buying any strength in a froth-driven market probably isn't the best idea. After a large gap up to start the day, we saw the key-index charts close with either nasty black candles, or worse, red candles, especially the Nasdaq and small caps. The selling wasn't intense, but the closes were well below the gap up open suggest sustained upside will likely be tough for a while here. In normal times, these types of candle sticks would be the prelude to some very intense short-term selling, but you can't count on that here since the rate driven bull is still very much alive.

Again, we should sell from here, but you can't be sure, especially since we also have the ECB talking about an infusion of QE tomorrow morning before the market opens. I think he'll give what the market wants, but I also believe all of that good news is likely in the market. We shall see, of course. The environment is not easy for either side, but the market seems as if it's at, or near, an important near-term top. I didn't say longer term, but I think short term, getting sustainable strong upside from here is going to be more than trouble for the bulls. Adjust to the environment and you'll be fine. Best advice I can give is I wouldn't be very long from here or opening too many new long plays.

Now we turn our attention to the biggest headache facing this market. It isn't the only headache and a big one at that as we are dealing with negative divergences on basically all the key-index charts on the weekly charts and even further out than out. Some of them are getting worse and worse as we grind higher. The longer they go out in time the worse off the bulls should feel about things for they will have to unwind at some point. There is no choice in the matter, but now to our real headache that trumps even those nasty negative divergences. Froth. Not just froth but 27 year level of froth. The bears are now down to 13.3%. This level of bears hasn't been seen since 1987. The market crashed at that level, BUT please remember that interest rates back in 1987 were well in to double digit territory.

There is no way to grasp or understand how we should expect the market to correct off this terrible level of complacency. Will it be 5%? Will it be 20%? No one knows. We can only learn as things move along but the 42.8% bull-bear spread along with 13.3% bears is a disaster for the bulls and will be forced to unwind over time. There's no way around it. The level of bears would scare me enough to avoid longs completely for a while. The risk is off the charts. Do what feels right to you, but know at some point that bull-bear spread will be in the twenties if not much lower.

Yes, this is no fun. It's not fun to wake up to gaps that reverse this hard and it's no fun knowing how tough sustainable upside will now be. It's no fun knowing that we will have to sell hard sooner than later, again, even if we move up first to another new high although that will NOT be easy. The market doesn't always have to be fun to be very interesting. Just relax and understand what we're dealing with. Stock collapses like we saw in Apple Inc. (AAPL) today is what we'll see in the market indexes at some point in the near future. Some down action will be very intense. It won't be straight down.

We're still very much in a bull market, but the topping process for the short-to-medium term, I believe, is under way. We'll see if this is correct or not over time, but I think you'd all be best served with extreme caution being your way of thinking.

Jack

Jack Steiman is author of SwingTradeOnline.com ( www.swingtradeonline.com ). Former columnist for TheStreet.com, Jack is renowned for calling major shifts in the market, including the market bottom in mid-2002 and the market top in October 2007.

Mr. Steiman's commentaries and index analysis represent his own opinions and should not be relied upon for purposes of effecting securities transactions or other investing strategies, nor should they be construed as an offer or solicitation of an offer to sell or buy any security. You should not interpret Mr. Steiman's opinions as constituting investment advice. Trades mentioned on the site are hypothetical, not actual, positions.

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