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If you Believe Major Market Strategists, We are Headed down 5-10% soon

|Includes: SDS, SPDR S&P 500 Trust ETF (SPY), VIXX

As we sit here having rallied to nearly 1,300 on the S&P, one would think all was lovely with the markets and we should as Jim Cramer tell's us, Cheer the new bull Market. But if you believe an number of major market strategist, we are headed into a tailspin very soon.

This afternoon we had Tom Demark on CNBC telling us that the markets are currently at a major turn and we will head down from here, perhaps as much as 11% (video should be on CNBC's website soon). For those of you who don't know who Tom Demark is, he created a series of market timing indicators called the DeMark indicators that are used by hedgefunds and other market timers. He also reportedly is a personal advisor to Steven Cohen at SAIC Capital.

Last night we also encountered Mark Faber of the Gloom, Doom, and Boom in an interview with Bloomberg. You can watch that interview on my blog here... and aside from some great entertainment value, he calls Obama a terrible President who is prostituting himself, he also speaks of indications of there being something "very wrong in the Chinese economy. Mark Faber believes we are on the verge of a 20-30% decline in the Chinese stock market and 10% decline in the S&P 500. His favorite area for the moment is US Treasuries. This is a sharp reversal from his recent recommendation to continue to ride the "reflation trade" by investing in global commodities.

We also have a more conventional Wall Street Analyst on the part of Tobias Levkovich. Tobias Levkovich is Citi's Chief Equity Markets strategist. You can watch that video on my blog as well... He is looking at the sentiment indicators in the market and has decided that there are too many folks lined up on the same side of the trade. Everyone is seemingly bullish in recent investor sentiment surveys. He also points out that February is a well known seasonally weak time for the markets and we have done nothing but go almost straight up since the end of November. Tobias likes a 5% correction.

So what should you do here? Well, what I did today is I bought some S&P 500 puts. I bought the SPY 130 puts during the day when we were at 130.00. I think that the 1,300 mark may be harder to move past than CNBC would like you to believe. If we are going to enter a sell off soon, DeMark said it may be as soon as tomorrow 1/27, than betting against the 1300 mark doesn't seem like a poor idea. Of course you could also buy some SDS. Now that the triple leveraged ETFs have been crushed in recent months due to the market run up, they don't tend to feel as volitile on a price change basis (though of course on a % basis they are as volitile as ever). You could also buy VIX calls or VXX. Given that we have rallied nonstop from November, nearly 11% on the S&P, it would be prudent to take a short position here to protect your longs or as an outright speculative position. Clearly some well known market icons would agree, we are due for a correction.

Disclosure: I am short SPY.

Additional disclosure: Short SPY through SPY 130 Feb puts.