SPX - Market Top C 10.22.17

Today, I will answer your questions and analyze the current market action plus explain what I am watching for to spot the next market top and downturn.

To help answer that question, I designed two charts in one. On the left is the current market action using just three items, the value of the SPX (Standard and Poor’s 500), a trend line and a momentum indicator. There’s no need to make it complicated.

Per my chart, the SPX continues to make new highs. Also, it is trading well above the multi-year trend line. The bottom chart shows momentum-money flow is increasing.

On the right side, I show what to watch for to determine if the market is making a top. I am looking for a new all-time high, then a lower high with decreasing momentum-money flow.

Finally, a price drop through the multi-year trend line (purple slotted line) then down through the previous low.

If and when this happens, I will then switch from the Bull camp and move into the Bear camp and make money while the market drops.

We all know the market will top, but it cannot run forever. The problem is no one knows exactly when or even why. Plus, if we have an exogenous event, meaning something tragic from outside the market, this would lead to panic selling, and you can throw this set-up out the window.

First, are you aware of the different tools available to signal market tops?

Second, are you tracking your holdings to see if they are topping?

Third, are you tracking the market to see if it is topping-now?

Fourth, if not, why?

Wall Street makes its money with us being in the market. We make our money with what we own and when.

Plan your work, work your plan, and share your harvest!

DAVID O. ENGLAND is the founder of the Eye on the Market-Training Academy (Davidoengland.com) and Associate Professor Emeritus of Finance. This column is for educational purposes only and not intended as financial advice. Your decision to buy, sell, short or hold any investment product is a direct result of your decisions, free will, and research. For questions-send to thetraderseye@gmail.com.

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