The trend has finally changed.

I believe that after 3 weeks of trading in a 50 point range we are finally poised to break out downward. Momentum has clearly been moving from the bulls to the bears. There is a legitimate EW count that puts us in the early stages of a move downward. Rumors are swirling that both C and BAC failed the stress test and several other banks, including WFC, did not do well. The whole swine flu thing, although terrible, is just noise. It is an excuse for the headline writers. It is easier to blame the weakness on the flu than on the fact that we are overbought and overdue for a correction.

Anyway if we open below 845 today could be VERY ugly. If we open over this price we may fill the gap, like yesterday, before turning down again. Today should end red.

I am adjusting my IT term outlook. The tight range trading over the last 3 weeks has muddied the IT picture and to some extent the LT picture. From an EW perspective the most probable scenario is for a shallower fall in prices before a final move up that could reach 1000+. However, since we put in such a long and solid top I am wondering if 875 will be the top. We can put in a low in the 750 area in the next couple of weeks, then push back up near 875 and satisfy the EW requirements for this bear rally. It is less common than a move over 875, but it definately could happen.

Also making things less clear is the shenanigans with the shrinking liquididty. This could add massive volatility to the markets making moves more extreme or it could be much ado about nothing. We will see and react.

Therefore I am adjusting my odds for the possible scenarios. #1 - 50%, we drop to the 725-750 range and then bounce to new highs before reversing in the next bear market. This has been my favored scenario for about 3-4 weeks. #2 - 25%, we drop to about 725-750 then bounce back to test 875 and fail. Then we start with the next bear market. #3 - 25%, The top is in and the next bear has begun. Although we technically satisfied the minimum EW requirements for this bear rally it is not very "neat". I keep an open mind, though, and the top we put in could be lasting so I have increased the odds for this scenario.

All of the technical indicators and my analysis suggest that the next 100 points is down. Therefore I am short. I have 5 short positions (CHRW, QCOM, BAC, AAPL and FAS)and I am long 4 inverse etfs (FAZ, SDS, SRS, QID). I am about 66% short. I will add to my shorts if we pullback today and try to close the opening gap. On my watchlist to short are EXPD, IBM, JPM, AMZN, BBY, SMH, GS and BIDU. Other inverse etf's I am looking at are SKF, TZA and EEV.

My plan is to stay short until the evidence points to some kind of correction upward.