Let’s play if The Price Is Right! You’ve won the bidding round and now you’re up to play the classic Cliffhanger Game (How to play Cliff Hangers: guess the price on three items! For each dollar you are higher or lower than the actual retail price, the climber moves up one space. If the climber has not fallen off after the last bid, you win!).

Do you think you can bet on the big stock market rally continuing and stopping just before the market makes its next significant pullback? Do you want to bet conservative and get/stay or with your bet on a pending big stock market pullback and risk going home with no prizes? Or maybe you’re anticipating a sideways, meandering stock market so you’re only focused on getting into the later Showcase Showdown.

I asked everyone on WallStreetAllStars, on TradingWithCody, and on Marketwatch who they think is more scared right now, the bulls or the bears. Here’s what the studio audience behind thinks would be your scariest choice (here’s how the poll results came out):

Bulls are more scared right now: 11

Bears are more scared right now: 69

Both are scared right now: 6

That is finally getting to be a pretty darn well-skewed enough majority to be somewhat of a meaningful indicator. Recall that when the bulls are overwhelming favorited as being the most scared, it can be a great contrarian indicator that the market is ready to put in a big rally, usually from a weak bottoming action. And when the bears are polling as the more scared bunch, it can indicate that the market is topping and ready for a big-time pullback.

I’ve seen this indicator flash 90% bulls and I’ve seen it flash 90% bears and usually that kind of polling result is indeed followed by contrarian move. With the poll hitting an 80% “Bears are more scared” result, we’re pretty close to that overwhelming threshold. I think the markets are ready for a near-term pullback that could last longer and go further than most everybody thinks right now. Just exactly as this ongoing, but long-in-the-tooth, rally has lasted longer and gone further than most everybody thought it would.

I’m going to add some SPY puts for protection here. I’m bidding for a small tranche of SPY puts with strikes around $150 on up with June 2013 expiration dates.  I’m also going to buy some June 2013 calls on the VIX, with strikes around $15 or so. The VIX is a measure of the market’s volatility, which means that if the market gets more volatile (and/or starts to pullback after a huge rally like we’ve seen), the VIX would theoretically spike. Here’s a chart of the past year’s action in the VIX.

It can certainly fall further if the market continues to gently rally. But somehow I don’t think it’ll be clear sailing for the next three months in the markets, in the economy, or in the volatility therein.

The Price Is Right Cliffhanger Fail