NEW YORK (TheStreet) -- Last week, global equity markets were undecided.

China's and Japan's equity prices have been moving higher. The Japanese Nikkei reached its highest level since 1996 last Tuesday, but then pulled back at the end of the week. Hong Kong's Hang Seng made a new monthly low, and the Australian market fell to a six-month low.

Europe was more decisive. Traders mostly sold stocks. The German DAX, London FTSE, and Zurich SMI all fell to monthly lows by mid-week and didn't recover much by Friday's close. In Russia, it was much different. Moscow's MICEX index rallied to its highest mark in three months.

In the U.S., the selling was even more intense. On May 19, the Dow Jones Industrial Average topped out at 18,351. The DJIA has failed to make a new high since then and continues to sell off. The decline, so far, has been more than 1,220 points, which is its greatest loss of the year.

Last week began very strong, with the DJIA up 245 points on Monday. It fell 212 points on Tuesday, and by Wednesday, the DJIA had fallen to 17,125, its lowest level since Feb 2.

We had a confirmed bearish/sell signal on Aug. 4, when the Dow 30 was at 17,596. Before I can take any bearish positions in the U.S., this signal needs to be confirmed by the SPX and the NDX-100 as bearish. Those two indexes are now neutral/trendless.

The SPX landed at support levels and found its footing once again. We are getting closer to the cycle lows in September/October, when the downward pressure will push it through its support trend lines. We are still into a sideways direction. It is a little too early to tell if it will continue the sideways motion or decline in some downward momentum.

SPX is undergoing a consolidation in a downtrend trend using the 200-day moving average as support. A daily close below 2,076, which does not hold, should bring about the next challenge to the 2,040 major support level. The current declining patterns are represented in those of the DJIA, New York Stock Exchange and the Dow Jones Transportation Average indexes.

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The Dow Jones Transports and the DJIA are leading the U.S. markets down during this topping process They are declining further than the other indexes, and the other indexes should be establishing their downtrends in the near future.

With the exception of a monumental one-day market crash, which happens once in a blue moon, bull markets that are topping undergo a drawn-out process that usually takes many months before bearish momentum finally takes over and a new downtrend emerges.

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Considering that U.S. stocks have been in a seven-year bull market, it would be unreasonable to expect such bullish momentum to change overnight.

Therefore, even though price momentum has been favoring the bulls lately, it is still my belief that it has been dangerous to be invested on the long side of these markets since Nov. 25.

U.S. equity markets have been fueled by cheap dollars and low interest rates. The stock-market crash of 2008-2009 gave investors a huge buying opportunity, but that is reversing.

On Nov. 25, my **Global Sentiment Model signaled "excessive extreme optimism," which provided an exit point on all long U.S. market positions. Traders and investors who remained in long positions have just been channeling, without any new breakouts into new highs.

There is a huge disconnect between the popular sentiment, among the talking heads on the news, regarding how these events will affect the Fed's meeting in September. The general consensus is that this could very well push any increase in interest rates into 2016. The Fed's board of governors has been decidedly dovish regarding that prospect, and has continued its quantitative financial engineering.

High bullish readings in the sentiment stock index usually are signs of market tops, while low ones signal market bottoms.

 

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Our current sentiment and technical features are consistent with a major stock-market top. This model uses the market sentiment composite, which is a measure of investor sentiment. The metric tracks the mood of investors, which is then translated into a probability whether the markets will advance or decline in the near term or in an undisclosed period of time. It is a contrarian indicator that produces a bullish signal, when market sentiment is overwhelmingly negative, and a bearish signal when markets are overwhelmingly bullish.

This article is commentary by an independent contributor. At the time of publication, the author was long SPX.