As the Russell 2000, NASDAQ Composite, and the S&P 500 are making new highs, this is a good time to look at how close we are to a sell signal.  Tonight we are going to look at charts of the put/call ratio, NASDAQ new highs/new lows (/ refers to divided by), and the NASDAQ Trin.

The first chart below shows the put/call ratio with a 25 day exponential moving average. The NASDAQ Composite is at the bottom of the chart. You can see how the put/call ratio declines with advances in the NASDAQ Composite and increases when the the index falls.  The 25 day exponential moving average of the put/call ratio is currently higher than both the 2005 and 2006 peaks in the NASDAQ Composite. Even though some technicians look at this as a divergence, we disagree. Our research has shown that markets top and bottom on extremes. We would expect the put/call ratio to be much lower before we trigger a signal of sell.

The next is of the NASDAQ highs/NASDAQ lows. Here, the indicator increases when the stock market increases and falls when the stock market declines. You can see how we are currently below both the 2005 and 2006 peaks in this indicator. We would expect this indicator to break above both of these levels before we are close to a sell signal.

The next chart is a 25 day exponential moving average of the NASDAQ Trin (the daily levels are not shown). This is like the first chart in the sense that the indicator peaks at bottoms and falls at tops. Currently, the indicator is above the 2005 and 2006 lows. When the Trin starts moving below these levels, we believe a top will be near.

As you can see from the below charts, we still have a lot of room to grow before the market has a long-term top.

We have also included the chart of the Russell 2000 tonight. In recent commentaries we have mentioned that we believe the index will peak in the 830 area. Currently, the Russell 2000 is sitting at 827. This is probably suggesting that the market is at or near a short-term top.