There are several technical indicators that I use consistently in my short-term market analysis. One of the best applications of these technical indicators is timing market’s entries and exits.

The idea behind this SMI indicator, popularized by money manager Don Hays and existing with many variations, is that emotional trading takes place at the beginning of the trading day (as traders react to overnight news event and economic releases) while the “smart money” takes the day to evaluate price action and input their orders before the market closes.

Developed by Sherman and Marian McClellan, the McClellan Summation Index is a breadth indicator derived from the McClellan Oscillator, which is a breadth indicator based on Net Advances (advancing issues less declining issues). NYSI dropped below December’18 lows this week and recorded -1183 reading on Friday. The question that I want to investigate, how low can the NYSI indicator fall?

After breaking out mid October 2019, Nasdaq has been going straight up for almost 4 months. Despite its monumental run, the breadth indicators are not confirming these new highs. Given these bearish divergences, here’s the scenario I see potentially developing.

The market has been disregarding a lot of bearish signs including an extreme reading on the Equity Put/Call Ratio (CPCE). The 50d MA of the CPCE currently stands at 0.54. There were only 4 other instances when this ratio was just as extreme during the last 20 years.

AD Line is one of the best breadth indicators when it comes to spotting big market shifts. All of the major tops have been formed on bearish divergences between the market and the AD Line indicator. Let’s examine some of the historical examples from the last 60 years and compare them to our current state of affairs.

The bull run since mid October 2019 has been absolutely amazing rewarding savvy investors who owned and held QQQ, SPY and most popular tech stocks such as MSFT, AAPL, and GOOGL. However, this run has also created one of the mosts extreme reading on the equity put/call ratio.

This post presents all of the key indicators that I track daily from the long-term perspective. No one can predict the future with high level of certainty, however, when all of the indicators are aligned, you know how to position yourself appropriately.

The rally that started in October last year has made everyone a bull. The equity put / call ratio (its 20d MA) is now at the level seen only 4 others times in the last 16 years. There are two conclusions: 1) odds of a correction are growing with every tick higher, 2) every correction led to higher prices eventually.

The NYSI indicator is one of my favorite breadth indicators. Besides tracking its trend on a daily basis as part of my market model, I also use NYSI to time the major turning points in the market.