Timing Tops - 3 Items Required

If only interested in current weekly developments, skip to the very bottom chart and read paragraph 3 (original post). Also- see previous price chart noting that ES futures are entering the 'C' target zone.

Top chart is newly added as a speculative type that we have had reasonable success with in the past. It is the [advance-decline / sp-500] 50ma and 200ma plots aligned with the sp-500 overlay. Care has to be taken creating anchor points and hi/low ranges within a specific time frame. Frequently, this approach has yielded guidance regarding where scalable targets may land. Currently there is only one prior sample (2000 top) so it definitely needs to remain speculative but we will keep it for now as it does match patterns seen in expanding triangles and also wave '4' retracement magnitudes going back to stock market wave '2' (Dow) low origins. (The assumption had to be made that since the relatively late inception of the sp-500, a correlation was required to go back to stock market origins using the Dow Industrials). Added: If the 200ma (late 2000) is taken out then targets most likely will target the lower ranges.

Note that wave 'C' could still have more to run as the current observation is that this pattern may belong to a very large degree system still developing  in a multi-generational time frame. Having said that- divergences in many places are looking to print at extreme levels and the guidance using 'third terminating waves and touches' seems to pop up in many areas particularly in large degree patterns. Also note that the rough drafted target zone for sp-500 could be an initial resistance area and not the final low for wave '4'.

Technical notes:  we found that dividing NYAD [advance-decline] by the sp-500 value has the effect of quieting the extremes in the ranges but keeps the trend intact for better directional indications.

Original post: [lower charts]
Timing higher degree tops is ill-advised unless you can ignore what you 'think' you see. Natural inclination is to 'see' that something is high and cannot possibly remain there or everybody is agreeing that it's overbought and it may even appear to be getting unstable (however you decide to define that one). All of these may be true- but it is mostly subjective if not based on repeatable data examples.

We now have the advantage of having more historical examples to look at and discern than at any other time for years. Let's review the simple weekly chart below.

#1 The summation index is yet another McClellan tool that is brilliantly designed. To break it into a fundamental signal, look for lack of a weekly downturn in the 50ma (pale green line) to indicate a strong possibility of more upside to run with the caveat that a downturn in the MACD may be the caution flag. Such is the case at present.

#2 & #3 To further define the maturity of the market, the weekly breadth NYAD MACD should have gone negative (#2) either current with or adjacent to the summation rollover together with weekly and daily NYAD 50ma turning down (#3). Currently #2 has not happened and #3 is marginal on the weekly and missing on the daily.

There are other criteria we use to gauge progress such as vectors and VIX patterns that we have posted about recently. However, since #1 has not yet happened, that makes #2 and #3 and the others pretty much non-decisive. The summation chart is one more part of the evidence that looks to be repeatable historically. Of course, the market can morph relatively quickly but usually there is a warning signal when a new development initiates.

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