A bullish transition of *this omen*. It has stayed negative recently, since the first half of 2023. Since the current level of the market isn't an input--it's not a momentum model--the fact that the market has been rising doesn't mean that the signal has been bullish.
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That's not what I said. I questioned the assertion, as I understood it, that now that the indicator has turned bullish, the market is likely to turn bullish soon.

This indicator has a built in forward-looking aspect. The signal is known about 40 weeks in advance. I haven't looked at exactly what it will be for the next 40 weeks (since that is 10 minutes more work than looking at the chart!) but it seems pretty clear it's going to become bullish because the unsmoothed gap has been positive and mostly rising since March, so the smoothed and lagged signal pretty much has to go bullish around year end.

Second, the market has been bullish, extremely so, for more than a year. So how can a bullish transition occur soon?

As mentioned, the signal does not react to what the stock market is doing, so it can be bullish or not during a strong market. The indicator hasn't been bullish for 2-3 years, and the market has risen--the indicator added no value.

Note, like a few other signals, I tend to interpret this one as a [bullish/no-info] signal, not [bullish/bearish]. Markets don't always do badly when the gap is negative, even back in the historical stretch that the signal seemed to do well. Note 1996, 1998-1999, and 2006-2007. Conversely markets have tended to do pretty well when it's bullish, despite the occasional weak in the middle of a bull.

Jim