December 12, 2021

========================

“Rather than love, money, or fame, give me the truth.” Henry David Thoreau

“The masses have never thirsted after truth. Whoever attempts to destroy their illusions is always their victim.” Gustave Le Bon.

“What happens today has happened before and will happen again.” Livermore

“Our Kindness is God’s ambassador,” Dr. Greg Borrer.

========================

Primary Trend: Down

Intermediate-Term: ~ Downtrend

LOLR Trend: ~Downtrend

Our Trading Position: 25% SPXU, 25% SQQQ, 25% VXX, 25% TZA

=============================

The documentation we assembled for this article is exceptionally long and detailed, covering nearly 100 years. We moved that supporting data to the bottom as a footnote.

One can always come back to a study of that supporting data later.

This article explains how we developed an understanding of the defining characteristics of Major Cycle tipping points.

The bottom section contains exhaustive documentation of market internals covering every Primary Top between 1925 and 2020.

===============================

Of these seven major averages versus SPX on Friday, December 10, 2021, NONE even confirmed the SPX ATH. That shortfall was arguably the most comprehensive and massive ever at any SPX ATH.

We noted decades ago that this is what a market TOP “looks like.” For decades, we have studied how market internals relate to SPX or the DJIA at the tipping point. This article results from those studies and understandings.

Following is a summary of how these market internals have behaved at Primary Peaks over the last century. The following list recaps 92 years of data at market cycle peaks. Detailed visual documentation is provided in the “footnote section” at the bottom of this article.

The overwhelming theme at any Major Top is FAILURE to confirm.

NYSE Cumulative Advances-Declines: Failed to confirm SPX (or DJIA) at 17 of the 20 peaks between 1929 and 2020.
Ten-year US TSY Yields: Failed to confirm at 12 of the 13 peaks we have data.
NYSE McClellan Summation Index: The index failed to confirm at 20 of the 20 peaks. The summation was positive at fourteen of those peaks and negative at six.
NASDAQ McClellan Summation Index: Failed to confirm at each of the 13 peaks we have data; it was positive at eight and negative at five.
NYSE McClellan Oscillator: It failed to confirm all 20 of the 20 tops; it was positive at twelve and negative at eight tops.
NASDAQ McClellan Oscillator: Failed to confirm at 13 of the 13 tops we have data; Was positive at eleven, negative at two tops.
Ten-day moving average of net new Yearly Highs (Highs minus Lows): Failed to confirm at all 16 tops for which we have data. Positive at 14, only negative at 2000 peak day and 2018 peak day.
Percentage of NYSE issues above their 50-day moving average: Data available last six tops; Ranges from a high of 76% at the 2007 peak day to a low of 55% at the 2020 Feb peak day.
The percentage of NYSE issues above their 200-day moving average: Data available for the last 11 tops range from a high of +79% in 1987 to 30% at the 2000 peak day.

Let us now rank Friday’s close of these crucial internals against the SPX ATH at each peak before the cycle.

Let’s see if Friday’s data “looks like” a top based on 92 years of history.

Friday, December 10, 2021:

As was the case with every market average, every internal ALSO FAILED to CONFIRM the peak in the SPX Average—all nine.

Let’s look at all nine crucial internals on December 10, 2021, and see where they rank in 2021 compared to how they closed at Primary Peaks over the past 92 years.

Let’s see if they look like they did at those 20 past tops:

NYSE Cumulative Advances-Declines were down 6000 units since November 18 SPX close of 4704, Check.
Ten-year US TSY Yields are down 30 basis points from the October peak. Check.
NYSE McClellan Summation Index -197.14 was 2nd lowest in 92 years at an ATH SPX. Check.
NASDAQ McClellan Summation Index -541.5 was the RECORD low at any SPX ATH in 92 years. Check.
NYSE McClellan Oscillator -10.29 is the second lowest it has been, second only to the 1948 record, after setting the record low of -41.85 at the then-ATH SPX of 4704 on November 18. Check.
NASDAQ McClellan Oscillator at -19.65 sets the RECORD low for all 13 past peaks we have data. Check.
The ten-day moving average of net new Yearly Highs (Highs minus Lows) at -40.54 sets the RECORD for any past peaks in 92 years. Check.
The percentage of NYSE issues above their 50-day moving average—at 42.12—is the record low for the six past peaks for which we have data. Check.
The percentage of NYSE issues above their 200-day moving average is 55.06, the fourth lowest in the 12 years for which we have data. Check.

As SPX closed at an ATH on Friday, December 10, 2021:

Every single market average failed to confirm SPX on Friday
Every single market internal was unable to confirm on Friday
NASDAQ Summation set a Record low for an ATH Friday
NYSE Summation set the Second lowest for an ATH in 92 years on Friday
NYSE McClellan Oscillator produced a Record Low at an ATH on November 18 and the Second lowest in 92 years on Friday
NASDAQ Summation Set a Record Low for an ATH Friday
The ten-day average on net yearly lows set a Record for an ATH Friday
The percentage of NYSE issues above their 50-day MA set a Record Low for an ATH on Friday
The percentage of NYSE issues above their 200-day MA was among the four lowest at an ATH on Friday

The above is what precisely every top has “looked like”- even those that predated me by many decades.

We are not necessarily referring to the precise day that SPX peaks, though it could be. But we refer to the area on the calendar to which we can point back and say, “That was the top.”

=================

In the mid-late 1970s, I became fascinated with the characteristics of primary tops and bottoms. Through research and observation, I set out to discover when those characteristics reach and signal the critical “tipping point.”

The line of least resistance was at the heart of Livermore’s successful trading. His successes had always come from trading with this rule. When he failed, it was because he had neglected this rule.

From 1929 to 1932, he amassed the equivalent of $1.1 billion in 2021 dollars ($100 million in 1932 dollars), trading with the Line of Least Resistance during the 1929 Bear Market.

He wrote, “Millions come easier once a trader learns how to trade than hundreds had before.” This oft-written quote directly referred to trading with the line of least resistance.

I wanted to know what a top (or bottom) “looked like” when viewed in real-time so that we could see it, recognize it, and, most importantly, act on it and then learn to sit tight with it.

In the intervening 45 years, that study has been my life’s preeminent pursuit and passion. Today’s article draws on more than four decades of study.

Markets are producing the most overwhelming weight of evidence this student has ever encountered. We’ve arrived at a tipping point.

===================================

Thousands of study hours led me to the following conclusions early on and have been confirmed yearly over the last five decades.

Three factors identify primary bottoms and tops in markets. Those are:

Cycles
Sentiment
Momentum

This article deals with the most potent of those three: market momentum. Identifying when momentum has turned positive to negative defines the new line of least resistance as down.

We have covered the other two categories in detail in many articles and will continue to do so.

This study’s daily data records go back to 1925, covering roughly a century of data from 1925 to 2021. Beyond 1925, significantly improved data began to be collected and published, and one can observe more data “filling in” the arrays below as time progressed.

This data now demonstrates that “we have arrived.”

One final caveat before we begin. By “we have arrived,” we do not insist with certainty that this is the day or week that SPX has made a final closing high, though that certainly would fit the data presented below. Regardless of which day the SPX strikes its last high in this cycle, we say that when we look back at this time two or three years from now, we will see that indeed, “we were indeed at the tipping point/TOP for SPX in Mid-December 2021.”

History will also clearly show that the other major averages, like the NYSE Composite and the Russell 2000, had been in Bear Markets for weeks or months when the tipping point for SPX arrived.

We’ll start with a comparative array that shows that NOT A SINGLE MAJOR AVERAGE confirms Friday’s SPX closing high of 4712.02.

Not one. Every major average is significantly LOWER now compared to its high from several weeks or months ago.

For example, the broad market (ADL) has been in a Bear Market for many weeks.

The above downtrends in the entire array of market averages (except the cap-weighted SPX) provide a powerful indication that SPX’s uptrend is on the very cusp of (or has begun) a historic collapse.

We will share more evidence below in this “footnotes section.”

================================

We provide analysis and comments every session, every night, plus weekly articles on Sunday. Check it out if so inclined:

Background, detailed comparisons, and complete documentation for 100 years are displayed below.

================================

The ultimate question that began to drive my research in the 1970s was simply the following:

“What does a FINAL TOP (or bottom) look like in market internals?”

We accumulated a list of internal measures defining the “condition of the market.”

Today, we will view just nine of the most crucial defining measures of market internals:

NYSE Cumulative Advances-Declines
Ten-year US TSY Yields
NYSE McClellan Summation Index
NASDAQ McClellan Summation Index
NYSE McClellan Oscillator
NASDAQ McClellan Oscillator
Ten-day moving average of net new Yearly Highs (Highs minus Lows)
Percentage of NYSE issues above their 50-day moving average
Percentage of NYSE issues above their 200-day moving average

We examine the internals for twenty-one individual TOPS – (1929, 1937, 1948, 1960, 1968, 1973, 1976, 1978, 1980, 1987, 1990, 1998, 2000-both of the double tops, 2007-both of the double tops, 2015, 2018 (both of the double tops), 2020, 2021.

The 21ST array (2021 Top) is the most essential part of this article. We will carefully examine this current collection of market internals through December 10, 2021, at an ATH closing high for SPX.

We will affirm what the data are telling us RIGHT NOW.

Hint: No data set for any period in the last 100 years was as compelling for a top in place as now, December 2021.

We use the Dow Jones Industrial Average for 1929, 1937, 1948, and 1960. During that period, daily data for SPX were still incomplete or unavailable. Following that, we switched to SPX for the arrays.

We obtained data for just three of our crucial internals before 1968. Then, two more became available and were added, and ultimately, all nine internal measures were available and appeared on the later charts.

However, even those three provide a good look at what a TOP “looked like” in those years.

The original article examines every Primary Cycle Top from 1929 to 2022.

December 12, 2021

========================

“Rather than love, money, or fame, give me the truth.” Henry David Thoreau

“The masses have never thirsted after truth. Whoever attempts to destroy their illusions is always their victim.” Gustave Le Bon.

“What happens today has happened before and will happen again.” Livermore

“Our Kindness is God’s ambassador,” Dr. Greg Borrer.

========================

Primary Trend: Down

Intermediate-Term: ~ Downtrend

LOLR Trend: ~Downtrend

Our Trading Position: 25% SPXU, 25% SQQQ, 25% VXX, 25% TZA

=============================

The documentation we assembled for this article is exceptionally long and detailed, covering nearly 100 years. We moved that supporting data to the bottom as a footnote.

One can always come back to a study of that supporting data later.

This article explains how we developed an understanding of the defining characteristics of Major Cycle tipping points.

The bottom section contains exhaustive documentation of market internals covering every Primary Top between 1925 and 2020.

===============================

Of these seven major averages versus SPX on Friday, December 10, 2021, NONE even confirmed the SPX ATH. That shortfall was arguably the most comprehensive and massive ever at any SPX ATH.

We noted decades ago that this is what a market TOP “looks like.” For decades, we have studied how market internals relate to SPX or the DJIA at the tipping point. This article results from those studies and understandings.

Following is a summary of how these market internals have behaved at Primary Peaks over the last century. The following list recaps 92 years of data at market cycle peaks. Detailed visual documentation is provided in the “footnote section” at the bottom of this article.

The overwhelming theme at any Major Top is FAILURE to confirm.

NYSE Cumulative Advances-Declines: Failed to confirm SPX (or DJIA) at 17 of the 20 peaks between 1929 and 2020.

Ten-year US TSY Yields: Failed to confirm at 12 of the 13 peaks we have data.

NYSE McClellan Summation Index: The index failed to confirm at 20 of the 20 peaks. The summation was positive at fourteen of those peaks and negative at six.

NASDAQ McClellan Summation Index: Failed to confirm at each of the 13 peaks we have data; it was positive at eight and negative at five.

NYSE McClellan Oscillator: It failed to confirm all 20 of the 20 tops; it was positive at twelve and negative at eight tops.

NASDAQ McClellan Oscillator: Failed to confirm at 13 of the 13 tops we have data; Was positive at eleven, negative at two tops.

Ten-day moving average of net new Yearly Highs (Highs minus Lows): Failed to confirm at all 16 tops for which we have data. Positive at 14, only negative at 2000 peak day and 2018 peak day.

Percentage of NYSE issues above their 50-day moving average: Data available last six tops; Ranges from a high of 76% at the 2007 peak day to a low of 55% at the 2020 Feb peak day.

The percentage of NYSE issues above their 200-day moving average: Data available for the last 11 tops range from a high of +79% in 1987 to 30% at the 2000 peak day.

Let us now rank Friday’s close of these crucial internals against the SPX ATH at each peak before the cycle.

Let’s see if Friday’s data “looks like” a top based on 92 years of history.

Friday, December 10, 2021:

As was the case with every market average, every internal ALSO FAILED to CONFIRM the peak in the SPX Average—all nine.

Let’s look at all nine crucial internals on December 10, 2021, and see where they rank in 2021 compared to how they closed at Primary Peaks over the past 92 years.

Let’s see if they look like they did at those 20 past tops:

NYSE Cumulative Advances-Declines were down 6000 units since November 18 SPX close of 4704, Check.

Ten-year US TSY Yields are down 30 basis points from the October peak. Check.

NYSE McClellan Summation Index -197.14 was 2nd lowest in 92 years at an ATH SPX. Check.

NASDAQ McClellan Summation Index -541.5 was the RECORD low at any SPX ATH in 92 years. Check.

NYSE McClellan Oscillator -10.29 is the second lowest it has been, second only to the 1948 record, after setting the record low of -41.85 at the then-ATH SPX of 4704 on November 18. Check.

NASDAQ McClellan Oscillator at -19.65 sets the RECORD low for all 13 past peaks we have data. Check.

The ten-day moving average of net new Yearly Highs (Highs minus Lows) at -40.54 sets the RECORD for any past peaks in 92 years. Check.

The percentage of NYSE issues above their 50-day moving average—at 42.12—is the record low for the six past peaks for which we have data. Check.

The percentage of NYSE issues above their 200-day moving average is 55.06, the fourth lowest in the 12 years for which we have data. Check.

As SPX closed at an ATH on Friday, December 10, 2021:

Every single market average failed to confirm SPX on Friday

Every single market internal was unable to confirm on Friday

NASDAQ Summation set a Record low for an ATH Friday

NYSE Summation set the Second lowest for an ATH in 92 years on Friday

NYSE McClellan Oscillator produced a Record Low at an ATH on November 18 and the Second lowest in 92 years on Friday

NASDAQ Summation Set a Record Low for an ATH Friday

The ten-day average on net yearly lows set a Record for an ATH Friday

The percentage of NYSE issues above their 50-day MA set a Record Low for an ATH on Friday

The percentage of NYSE issues above their 200-day MA was among the four lowest at an ATH on Friday

The above is what precisely every top has “looked like”- even those that predated me by many decades.

We are not necessarily referring to the precise day that SPX peaks, though it could be. But we refer to the area on the calendar to which we can point back and say, “That was the top.”

=================

In the mid-late 1970s, I became fascinated with the characteristics of primary tops and bottoms. Through research and observation, I set out to discover when those characteristics reach and signal the critical “tipping point.”

The line of least resistance was at the heart of Livermore’s successful trading. His successes had always come from trading with this rule. When he failed, it was because he had neglected this rule.

From 1929 to 1932, he amassed the equivalent of $1.1 billion in 2021 dollars ($100 million in 1932 dollars), trading with the Line of Least Resistance during the 1929 Bear Market.

He wrote, “Millions come easier once a trader learns how to trade than hundreds had before.” This oft-written quote directly referred to trading with the line of least resistance.

I wanted to know what a top (or bottom) “looked like” when viewed in real-time so that we could see it, recognize it, and, most importantly, act on it and then learn to sit tight with it.

In the intervening 45 years, that study has been my life’s preeminent pursuit and passion. Today’s article draws on more than four decades of study.

Markets are producing the most overwhelming weight of evidence this student has ever encountered. We’ve arrived at a tipping point.

===================================

Thousands of study hours led me to the following conclusions early on and have been confirmed yearly over the last five decades.

Three factors identify primary bottoms and tops in markets. Those are:

Cycles

Sentiment

Momentum

This article deals with the most potent of those three: market momentum. Identifying when momentum has turned positive to negative defines the new line of least resistance as down.

We have covered the other two categories in detail in many articles and will continue to do so.

This study’s daily data records go back to 1925, covering roughly a century of data from 1925 to 2021. Beyond 1925, significantly improved data began to be collected and published, and one can observe more data “filling in” the arrays below as time progressed.

This data now demonstrates that “we have arrived.”

History will also clearly show that the other major averages, like the NYSE Composite and the Russell 2000, had been in Bear Markets for weeks or months when the tipping point for SPX arrived.

We’ll start with a comparative array that shows that NOT A SINGLE MAJOR AVERAGE confirms Friday’s SPX closing high of 4712.02.

Not one. Every major average is significantly LOWER now compared to its high from several weeks or months ago.

For example, the broad market (ADL) has been in a Bear Market for many weeks.

The above downtrends in the entire array of market averages (except the cap-weighted SPX) provide a powerful indication that SPX’s uptrend is on the very cusp of (or has begun) a historic collapse.