In the past two weeks I explained why a market top could not yet be confirmed. On April 19 I wrote, Warning Flags Fly, But Stock Top Unconfirmed. Then on April 26 I wrote, Dow, S&P, Nasdaq Poised To Recapture March/April Highs.

Two Ways to Confirm a Market Top:

  1. The weekly charts need to shift to negative. This happens when weekly closes are below the five-week modified moving averages at 14,495 Dow Industrials, 1556.5 S&P 500, 3233 Nasdaq, 6071 Dow transports and 928.85 Russell 2000 with 12x3x3 weekly slow stochastic readings declining below 80.00 on a scale of 00.00 and 100.00. Only transports and Russell 2000 have readings declining below 80.00.
  2. Another confirmation comes from my proprietary analytics. A weekly close below my semiannual value level at 14,323 Dow Industrials.

The S&P 500 has been trading back and forth around its semiannual pivot at 1566.9. Dow transports has also been testing annual and semiannual pivots at 5925 and 5955. The Russell 2000 has yet to test its semiannual risky level at 965.51.

For May I show monthly value levels at 14,651 Dow Industrials and 3233 Nasdaq with a monthly pivot at 1587.3 S&P 500, and monthly risky levels at 6284 Dow transports and 962.82 on Russell 2000.

My Forecast:

My annual value levels at 12,696 Dow Industrials, 1348.3 S&P 500, 2806 Nasdaq, 5469 Dow transports and 809.54 Russell 2000 will be tested in 2013.

At the time of publication the author held no positions in any of the stocks mentioned.

This article is commentary by an independent contributor, separate from TheStreet's regular news coverage.
Richard Suttmeier has an engineering degree from Georgia Tech and a master of science from Brooklyn Poly. He began his career in the financial services industry in 1972 trading U.S. Treasury securities in the primary dealer community. In 1981 he formed the Government Bond Department at LF Rothschild and helped establish that firm as a primary dealer in 1986. Richard began writing market research in 1984 and held positions as market strategist at firms such as Smith Barney, William R Hough, Joseph Stevens, and Rightside Advisors. He joined www.ValuEngine.com in 2008 producing newsletters covering the U.S. capital markets, and a universe of more than 7,000 stocks. Richard employs a "buy and trade" investment strategy and can be reached at RSuttmeier@Gmail.com.

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