Version 2. See last week's version here. Perhaps this will become a series :) In fact I like this idea and will create a tag.
Edits to conditions from Version 1 added in italics.
Not calling a top yet, but some conditions for a top approaching and/or more in place.
1. Multiple major USA indexes at major resistance, then rejections? VIX / XIV alert?
So far SPX set halfway clear, and if stocks go higher then INDU set YR1 will be in play. Just because we're at a level doesn't mean a turn though - like SPX YR1 turned into support without too much trouble. So we have to see rejection to really call a turn just like we need to see pivots / support hold before a confident low is in too.
Still, INDU YR1 could turn out to be as important as YS1 - these things happen! If it is going to be a major turn, then we should see multiple indexes at resistance and VIX / XIV alert. This hasn't happened yet. VIX and XIV still saying all clear.
Bottom line - big levels mean turn possible, but so far SPX set more bullish by clearing on the cash index and current futures. Other indexes - Tech set, IWM and NYA have cleared Q3R1s too. No rejections. No VIX / XIV alert. Not a top yet.
2. RSI estreme reached? Negative divergence? Bollinger bands in play, or divergence? (ie "other technicals)
The only charts with RSI extremes are quarterly and timeframes under daily, ie short term 4 hour, 2 hour, 1 hour. I am not too worried about quarterly chart overbought because this is what happens in bull markets. I am more concerned if we see divergence, a move stopping bang on 70, or a reversal bar. INDU could be worth watching because right now the quarterly chart does look like divergence as RSI slows to 70. We're only a few weeks into Q3 though and a lot could happen before this bar closes and the RSI finalizes.
Keep in mind that SPX RSI is currently 73, bullish to be above 70; and NDX RSI has been 69+ from 2013 Q3. Like I said, quarterly chart RSI overbought is what happens in bull markets. It is divergence that you don't want to see, and if you get lucky to catch a blow-off move 80+ then it is just a matter of managing trailing stops.
Daily charts will likely reach RSI OB soon, so I'll be watching to see how market responds.
Simple answer to RSI - not yet. Daily, weekly and monthly charts room to go higher.
Turning to Bollinger bands, USA indexes responded positively to weekly bands ie blast through, and SPX is now close to tagging its monthly band. As these start to slope up the index can push the band. Response to bands and divergence is what I am watching for - so far market is OK.
3. High tested with at least 1 lower high?
Friday could be seen as high test or middle of up depending on what happens next week. But still, not really and no lower highs.
4. Safe havens showing concern?
Mildly with the bounce on Thursday and Friday.
5. Breadth or volume divergence (adv / dec volume is my favorite)
Mildly with the pause week last week, but strength in NYA / VTI, RUT / IWM and ACWI help alleviate breadth concerns.
6. Sentiment extremes reached?
Yes, definitely. 3 of 4 meters I track now have reached significant extremes. These show on shorter term timeframes, but not on longer term moving averages. See recent post.
7. Valuation / fundamentals?
Many would argue this is most important, but I believe information will show in charts first - although the Citigroup Economic Surprise index did a great job confirming the stock breakout. Valuations on the higher side, but in later stages of 2009 bull market maybe we will see SPX forward p/e near 20 especially if political concerns ease in the fall.
8. Timing window?
I don't get them all and some turn out to be non-events, but several major turns this year have been in timing windows identified in advance.
2/11-15 stock low / bond high
6/8 stock high
6/28 (missed by 1 day and magnitude)
July dates as listed from end June have been:
7/13-15 looking like short term momentum top and/or non event
7/29-8/5 looks like one of the stronger timing windows of the year. It may not be a final stock market high, as those are more likely in Q4-Q1, but could be a decent top if we see INDU stop bang on its YR1 in that period, along with sentiment going bonkers. Let's see.