market-top-detector

---
name: market-top-detector
description: Use when assessing market top risk, distribution days, defensive rotation, or leadership breakdown for 2-8 week tactical timing signals ahead of 10-20% corrections.
category: Market & Macro
version: 1.0.0
tools: []
---

# Market Top Detector

Estimate market-top probability with a quantitative 6-component 0-100 composite score, integrating three market-top detection methodologies: **O'Neil** (Distribution Day accumulation — institutional selling), **Minervini** (leading-stock deterioration pattern), and **Monty** (defensive sector-rotation signal). Unlike a macro Bubble Detector (multi-month evaluation), this focuses on **tactical 2-8 week timing signals** that precede 10-20% corrections.

## When to Use
- "Is the market topping?" / "Are we near a top?"
- Distribution days accumulating
- Defensive sectors outperforming growth
- Leading stocks breaking down while indices hold
- Timing questions about reducing equity exposure
- Assessing correction probability over the next 2-8 weeks

## Data to Collect
Gather via web_search, using data from the most recent 3 business days (stale data degrades accuracy):
1. S&P 500 breadth — % of stocks above the 200-day moving average and the 50-day moving average (valid range 20-100)
2. CBOE Equity Put/Call Ratio (valid range 0.30-1.50)
3. VIX term structure (steep_contango / contango / flat / backwardation) — optional but useful
4. Margin debt YoY % — optional, typically lagged 1-2 months; record the reporting month

Also gather price/volume data for major indices, growth-ETF baskets (e.g. ARKK, WCLD, IGV, XBI, SOXX, SMH, KWEB, TAN) as a leading-stock-health proxy, and defensive-sector ETFs (e.g. XLU, XLP, XLV, VNQ) vs. growth-sector ETFs (XLK, XLC, XLY) for the rotation signal.

## 6-Component Scoring System
| # | Component | Weight | Key Signal |
|---|-----------|--------|------------|
| 1 | Distribution Day Count | 25% | Institutional selling in the last 25 trading days |
| 2 | Leading Stock Health | 20% | Growth-ETF-basket deterioration |
| 3 | Defensive Sector Rotation | 15% | Defensive vs. growth relative performance |
| 4 | Market Breadth Divergence | 15% | 200DMA/50DMA breadth vs. index level |
| 5 | Index Technical Condition | 15% | MA structure, failed rallies, lower highs |
| 6 | Sentiment & Speculation | 10% | VIX, put/call ratio, term structure |

## Risk Zone Mapping
| Score | Zone | Risk Budget | Action |
|-------|------|-------------|--------|
| 0-20 | Green (Normal) | 100% | Normal operations |
| 21-40 | Yellow (Early Warning) | 80-90% | Tighten stops, reduce new entries |
| 41-60 | Orange (Elevated Risk) | 60-75% | Profit-taking on weak positions |
| 61-80 | Red (High Probability Top) | 40-55% | Aggressive profit-taking |
| 81-100 | Critical (Top Formation) | 20-35% | Maximum defense, hedging |

## Presenting Results
Report: composite score and risk zone; any data-freshness warnings (data older than 3 days); the strongest individual warning signal (highest component score); the closest historical comparison (2000, 2007, 2018, 2022 market tops share similar component patterns); a brief what-if sensitivity note on the key inputs; and recommended actions based on the risk zone. If a Follow-Through Day has occurred, note its status. If a prior analysis exists, note the delta.

## Difference from a Bubble Detector
A market-top detector times a 2-8 week, 10-20% correction from price/volume/breadth signals (O'Neil/Minervini/Monty); a bubble detector evaluates months-to-years of valuation/sentiment/social excess (Minsky/Kindleberger) toward a 30%+ collapse. Use the top detector for tactical entries/exits; use bubble frameworks for strategic positioning.