We're officially in crazy town, and as expected, now we are seeing sentiment change.

If you're an index investor, you can do very well by using this tool to measure "fear" in the market.

The market has gone nowhere over the past few months. And the trading conditions have been anything but easy to manage.

The euro crashed again yesterday. After a brief period of stabilization, the euro formed a bear flag then broke decisively to the downside.

While I believe we are headed higher over the next three weeks, the bears have a funny way of changing the tide of the market without any detection.

I am going to keep my bullish outlook, but the indices need to find support immediately.

The market took a nosedive yesterday, directly to 1197 support. In addition to the plummet, and sadly for the bulls, volume was high.

Yesterday's additional volume likely came from a few bullish traders who rushed in expecting 1225 to hold, then closed those positions once 1225 support was taken.

S&P 500 stocks broke out of a triangle pattern that was at least three weeks in the making today. And that’s good news if you’re a bear.

The concern over Italy and the Italian bonds has taken the euro lower. And generally speaking a weak euro is bad for the stock market.

During strong trends, leadership stocks, sectors and indices are often defined by large rises on above average volume and miniscule declines on low volume - while the opposite is usually true during bear trends.

Financials have clearly driven this rally. And it makes sense - this rally is being built on a bailout designed to help banks.

Tuesday's late reversal had investors worried that a Hope Rally was fading quickly. But we should note that stock price moves always have a lot to do with expectations and anticipation.

The market took a pause, finally, and declined roughly a percent yesterday. At the open, the indices gapped down by more than 2%, but a last hour surge by buyers recouped a large portion of those loses.

Volume was below average. And the hardest hit areas were financials (that's why we own ProShares UltraShort Financials ETF (NYSE:SKF)) energy and industrials.

The market continued its incredible rally higher on Friday. Volume increased as the bulls tacked on another gain and the SPX finished 5% higher for the week. More importantly, SPX was able to rally past 1175 again.

After the burst past 1175, buyers wasted no time and took the SPX all the way up to 1220 resistance. But much like in the past, 1220 could not be broken.

Over the past month or two months I have stayed bullish, but at the same time I refused to believe SPX could rally past 1250 without government assistance.

The market blasted higher yesterday and the bulls recovered a lot of lost ground. The volume yesterday wasn't all that strong, but the bulls were able to overcome resistance zones. SPX blasted 3% higher, which put it way past 1175 and took the index all the way up to 1197 resistance.

Now that 1175 has been reclaimed that area needs to be support. I didn't like that SPX went below the 1175 level on Tuesday, but it recovered fast enough to give the bulls a second chance at 1250.

You're familiar with "indicators" - the many and sundry data points that analysts point to as evidence of everything from an impending stock market crash to the end of a bear market in pork bellies.

The market was slammed again on Friday. Volume was light, due to the holiday, but the indices slipped by over 2%. Once again financials led the charge lower and the big banks like JPM, WFC, GS and C were down nearly 5% while BAC lost 8.3%. And the worst of the decline is not over.

The FHFA sent lawsuits to 17 banks. And the amount that was sought is in the billions of dollars. But the fear on the street is that if banks pay one settlement for a fraudulent mortgage, hundreds more cases will follow. And with $5 trillion in questionable loans, the banks are on the hook for a large sum of cash.

The market rebounded in a strong way last week. Over the past three weeks, I cautioned against going short - it's not because I wasn't bearish or that I am super bullish. I had a long bias because the indices were oversold at strong historical levels of support.

While the indices did not sink lower. I really cannot say that the indices jumped higher until last week. And even now, although I expected another ride to 1197 there isn't much of a chance of a sustainable break out past that. The 1250 resistance will be a beast, and barring any stimulus plan or political intervention (as if those idiots could act fast) there really is not much of a reason for SPX to blast any higher.

The market broke free, momentarily, of 1197 resistance yesterday morning and pushed over 1% higher to start the day. But right around 10:00, most indices peaked, and by lunch they traded with minor losses. While the indices were able to bounce off those lows, most still finished flat on the day.

More important than the flat session was the inability of the bulls to keep the market above 1197 for the second time this week. Additionally, all major U.S. indices formed long wicked doji candles, which do qualify as a topping candle.

The market bears are back. In a kamikaze attack, the bears threw everything they had against the market yesterday - and won. The decline started eight days ago, but in yesterday's plummet there was no shelter and if you owned stock you lost money - it's that simple.

Declining stocks to advancing stocks were about 19 to 1. Down volume to up volume (some of which was us) was an incredible and jaw dropping 1.8 billion to 20 million.

Going into the day, I expected a nice leisurely decline to Monday's low, then stabilization, maybe even a bounce back to 1280. I figured the indices were oversold, and near a reliable support zone. Wrong.

The market was crushed again, and my 1250 target was hit - now what? Once 1301 broke earlier in the week, the new target became 1250, which was the lowest level of our trading range. And the decline happened quickly; only one week ago the market was knocking on new highs above 1350.

Volume has increased in a dramatic way over the past week as investors have literally fled from the indices. Conversely, new money poured into bonds, which is a sign that investors want out of risky assets in exchange for low risk investment vehicles.

And unfortunately, this flight to bonds does not look like a quick trade. The move in bonds appears to be the beginning of a multi-month push higher. As such, there is every reason to believe that the stock market will experience a downward move over that same time.

Before I get in trouble - I want to make it crystal clear that I don't have a letter from Federal Reserve Chairman Ben Bernanke.

What I do have is the letter that I would need to see him write in order to convince me to sell my gold and silver and hold dollars instead.

Seeing this letter is not the only condition under which I would sell my precious metals, of course, but since Bernanke is the dollar's Commander in Chief, he certainly has the sway to pursue the types of policies that would turn me dollar bullish.

Without further ado, here's the letter I'm waiting for:

"Dear America,

I'm sorry. I was wrong.

The market was unable to generate any upside follow-through off Monday’s recovery move, and the Russell 2000 (NYSE: IWM) tumbled 19.09 points, or 2.64% to a fresh low before closing at 704.86 on Tuesday. Momentum readings are extremely oversold, which could stall downside aggression, but for now the bears are clearly in charge of things.

The next downside target is at 700.00; after that there is very little chart support until 685. On the upside, resistance comes in at 712 and 721.