With the Dow hitting 12,000 for the first time in more than two years, many investors are getting really excited.

However, as Warren Buffett said at the bottom in 2008, you should be greedy when others are fearful and fearful when others are greedy.

Now is the time to be getting fearful.

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Most investment polls are showing large amounts of bullishness and that, for the first time in years, retail investors are beginning to re-enter the equity market.

In addition, while I am long-term bullish on emerging markets, higher food prices and inflation are going to be real problems for India and China in 2011 and could stifle their markets in the short term (A note if these markets drop: It is a great buying opportunity).

However, my biggest reason for being cautious is where we are in the cycle. In my book, “The Great Super Cycle: Profit from the Coming Inflation and Dollar Devaluation,” I explain why the 2009-2011 rally is just a short-term bull market and not the start of a long-term secular trend.

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When looking at historical trading of markets, I found that most markets trade in 15-year to 20-year cycles. There are bull-market cycles where markets perform very well and bear-market cycles where markets don’t perform well.

Since 2000 and the onset of the dot-com bust, we have been in a major bear-market cycle. However, within the context of these cycles, there are big moves up and down: declines of 50 percent, rallies of 100 percent or 200 percent.

When looking at the crash of 2008, I thought it compared most favorably to two financial crises. The Panic of 1907 and the bear-market smash of 1974. Both of these crashes were followed by 2 year stock-market rallies and then followed by bear markets of 25 percent to 30 percent.

Two years from 2009’s bottom brings us to March 2011, which is just more than a month away.

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Now I’m not saying this is going to repeat the exact same way. However, following these cycles allowed me to buy at the market low in early 2009 and I now expect that markets could top out in the first half of 2011.

However, the upcoming bear market will be much different than the bust of 2008. In both 1911 and 1977, the ensuing bear markets were very inflationary in nature with rising interest rates and inflation the causes of the market decline.

Therefore you must position yourself to take advantage of the coming massive inflation, which will stop the current bull, dead in its tracks.

About the Author: David Skarica
David Skarica is a member of the Moneynews Financial Brain Trust. Click Here to read more of his articles. He also writes the Gold Stock Adviser. Discover more by Clicking Here Now.