The stock market has topped for this long term cycle. You have heard it here first! I am using key divergences with RSI and MACD (+ histogram) on the $SPX to understand this topping process. $DJI is showing a similar set up, while COMPX and RUT are not showing similar set ups but showing waning momentum. The The market has been pushing up even though momentum has been waning for almost 1 1/2 years now. As a result the market strength is relatively low. I marked the divergences on price and then the indicators. Use it as an example to see the same on the topping process in 2007. All tops are not built the same, keep that in mind. As an example, this top could take longer and be very different than the previous one. Further, keep in mind that topping processes are complex and give a 5% rise above the high to be established.
What would invalidate a top? Renewed strength in the said indicators RSI and MACD would invalidate the top for me. Meaning the indicators have to creep above their previous highs.
Is it ideal to short the market here? I would not short the market here. Staying in cash is the strategy here. A close below the 50 period MA would be an ideal spot to short with a 5% stop above it.