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In my August 22 article I indicated that markets will have a good run in September and October.

Yes, the bull run did start on the first day in September as expected and all major indexes have gained over 8% this month so far. We've made good profits during this two week run. We bought Apple (NASDAQ:AAPL) September 250 call options for $2.00 at the end of August and the call option traded as high as $27.95 last Friday. That's almost a 1,300% return in less than three weeks.

Actually, one would have had anywhere from 700% to over 1,000% gains if he/she had bought call options for Amazon (NASDAQ:AMZN), Priceline (NASDAQ:PCLN), Google (NASDAQ:GOOG), etc. at that time.

Why is it now a market top?

1. All sentiment indicators give the same readings as they had when they reached their April highs.

2. The recent rally is not broad based.

At least 70% of stocks, which reached yearly highs in April, are now at yearly bottoms or in a downtrend. This includes tech stocks such as Intel (NASDAQ:INTC), Dell (NASDAQ:DELL), Cisco (NASDAQ:CSCO), Micron (NASDAQ:MU), Cree (NASDAQ:CREE), SanDisk (NASDAQ:SNDK), Varian (NASDAQ:VSEA), Applied Materials (NASDAQ:AMAT), etc.; bank stocks such as Bank of America (NYSE:BAC), Citigroup (NYSE:C); home construction stocks Ryland (NYSE:RYL), Toll (NYSE:TOL), KB Homes (NYSE:KBH); energy stocks Diamond Offshore (NYSE:DO), Total SA (NYSE:TOT), Exxon (NYSE:XOM), US Steel (NYSE:X), AK Steel (NYSE:AKS), etc, insurance stocks, education stocks, etc. You name it.

Only a handful of stocks are at yearly highs or have reached April's high levels. Those stocks include: 'Appleconomy' related stocks such as AAPL, Qwest (NYSE:Q), AT&T (NYSE:T), AT (NYSE:ATT), RF Micro Devices (RFMD), Stanley Black & Decker (NYSE:SWK), EMC (NYSE:EMC), NetSol (NASDAQ:NTWK); Internet stocks such as AMZN, PCLN, F5 (NASDAQ:FFIV), Akamai (NASDAQ:AKAM), Salesforce (NYSE:CRM); certain REIT stocks (all overvalued) such as Simon Property Group (NYSE:SPG), Vornado (NYSE:VNO), Boston Properties (NYSE:BXP), etc; and defensive stocks.

The economy does not support further gains.

3. Even AAPL may have reached its top because Cramer pushed AAPL several times last week during his CNBC shows. That is to say: When Cramer says BUY BUY BUY, be very careful.

4. Major indexes have several gaps made during the run that are waiting to be filled. The latest gap may qualify as a bearish one. Take the NASDAQ index as an example, it has four gaps during the run: from 2,114.03 -> 2,141.95, 2,200.01 -> 2,227.00, 2,232.48 -> 2,263.69 and last Friday's from 2,303.25 -> 2,320.37.

Of course, I do NOT know on which day the market may make a turn, but what I can say is, it is close.

Let's find out whether I will be right this time.

Disclosure: Long GOOG, MU, AKS

Source: The Market Has Reached Its Important Top