"The stock market is poised to complete the bear market rally from March," says Steven Hochberg, technical expert and editor of The Elliott Wave Financial Forecast. Here's his bearish call.

"On April 2, we forecast a rally that would carry the Dow to 9,000-10,000 and the S&P 500 to 1000. These levels have now been met.

"We felt this price target would represent a respectable place to exit long positions. But we know from past experience that many will hold out for even higher prices.

"The stock market has now fulfilled our forecast made back in February for a rise to 9,000-10,000," says Robert Prechter. In The Elliott Wave Theorist, he now sees increasing risk.

"The rally in the S&P since March has been one of the faster ever, rising 50% in five months, and rapidly carrying the S&P to the lower end of our general target zone of 1000-1100.

"At the same time, optimism has finally reached 'Primary degree' levels. The daily sentiment index recently reported 88% bulls among S&P traders, a reading equal to that on October 9, 2007, the top day of the 'Cycle B wave' when the Dow made its all-time closing high of 14,164. Higher readings are possible, but we are no longer compelled to wait.

Despite a strongly bearish long-term outlook, technicians Stephen Hochberg and Robert Prechter continue to see near-term upside for the market.

In The Elliott Wave Financial Forecast, a specialty service focused on a form of technical analyst known as Elliott wave theory, they explain, "Optimism is definitely on the increase, but it is not yet as the exteme that typically accompanies the end of a Primary degree rally.

"So notwithstanding near-term gyrations, the Dow should rise to the initial target, which remains in the 9,000 to 10,000 range.

Steve Hochberg believes the market is now in the process of forming a major long-term top. Here is his bearish outlook from the Elliott Wave Financial Forecast.

"Last January, we forecast that 2007 would be the year of the 'financial flameout'. And while the financial sector is down sharply, we believe this is still just the downpayment on the sector's full decline, which will last at least the next few years.

"From 1980 to 1999, we saw a simulataneous rise in the Dow in terms of dollars (nominal), gold (real) and commodities (purchasing power). This advance signified real gains for investors. The market's topping process started in late 1999 when the Dow peaked in terms of real money and purchasing power.

The Dow's rise since 2002, however, occurred only in dollar terms. The Dow's new nominal high does not represent an increase in purchasing power nor a rise in real money. In fact, it is just the opposite, as the Dow denominated in denominated in each of these assets classes has been crashing.

Steve Hochberg, editor of The Elliott Wave Financial Forecast, has been warning investors that the bull market was poised for a dramatic downside reversal. Two weeks ago, I posted the commentary from his speech at the World Money Show in which he outlined his bearish long-term case.

Following yesterday's market decline, he issued an update, reaffirming his negative stance. He notes, "Yesterday was a confirmation day, with the DJIA, S&P and NASDAQ all breaking their respective 'trigger' levels, indicating that a top is in. The Dow industrials declined beneath the key 12,337 level, plunging to an intraday low of 12,086.10 before bouncing into the close.

"The S&P easily slid through its support trendline of 1435.85, which has contained the rally since last November, falling to an intraday low of 1389.42. And the NASDAQ negated the ending diagonal interpretation of its fifth wave, breaking 2440 and confirming that the five-wave rise from July is over."

"All the major stock indexes should now be at the forefront of an extended decline. There were many astounding statistics associated with the decline, such as the NYSE volume. A whopping 99% of total NYSE up and down volume was on the downside! A quick perusal data shows only two days with a greater percentage of daily downside volume: October 27, 1997 and the crash day of 1987.

"Yes, these two prior instances marked stock market lows. But these instances occurred after a period of a persistent and strong decline in the indexes. They represented capitulation.

"Yesterday's huge volume spike occurred only 5 days after the high, so the odds that it marks a capitulation are very low. Instead, it should be the kick-off to a more protracted period of selling pressure.

"That is why we focus so heavily on sentiment. When almost everyone is on one side of the door, if they all choose to go to the other side of the door at the same time, days like we have just seen can occur.

"What now? Looking ahead, there will likely be a very short-term low established soon. What will follow will be a short (in time) counter trend bounce, which should lead to more selling pressure and lower prices. These 'bounces' may be sharp in price due to possibly short covering, so be prepared.

"The Dow's next possible support area is 11,965 - 11,989, the S&P's next support is 1360 - 1377, and NASDAQ's support is 2316-2333. Should these levels be broken on the downside, we will then see another wave of selling."

Steven Halpern's TheStockAdvisors.com provides a free, daily overview of the latest stock ideas from the nation's leading financial newsletters.

Each year Steven Halpern, editor of TheStockAdvisors.com, surveys the leading financial newsletter advisors asking for their favorite stocks for the coming year. This article is part of his 24th annual Top Picks Report.

For both of their top picks for 2007, Steve Hochberg and Pete Kendall look to ETFs -- the iShares Lehman 1-3 year Treasury Bond Fund (ASE: SHY) for conservative investors and a short position in the iShares S&P SmallCap 600 Index Fund (NYSE: IJR) as a speculation.

The co-editors of The Elliott Wave Financial Forecast explain, "Stock prices have been crashing since 1999 in terms of real money, a fact of which nine out of ten people are unaware. From 1980 to 1999, stocks rose in terms of paper dollars, gold, and commodities. Since 1999, a historic shift out of stocks and into hard cash or 'things' has been underway.

"Relative to gold, the Dow is down 56% and the NASDAQ is off 78%, with new lows made this year. Similar stock market behavior occurred from 1966 to 1980, a time period that included a decline of 50% in the S&P 500 index.

"The Dow is at a new high in nominal terms due to credit inflation, which has allowed the index to stay up because the measuring unit (the dollar) is falling. Historically, whenever a discrepancy between the performance of the Dow in real terms and the Dow in nominal terms develops, the Dow in nominal terms always plays catch up to the Dow in real terms.