1. Power up as usual; don't home the machine but jog both axes to within .100 of home.
2. Push in the E-Stop on Control Front Panel to remove power from motors.
3. Disconnect the Z-Axis Motor connector at the rear of the control.
4. Move the Spindle cable to Z-Axis connector.
5. Release the E-Stop and set Servos ON.
6. Press and hold Ctrl key, then press "E" to pop up following error box.
7. Observe the Z Axis error and rotate the spindle M03 direction (CCW) 1/2 turn; error should increase to about +2000.
8. Turn spindle back (CW) one full turn; error should decrease to zero, then continue to about -2000.
If these results are not obtained, endcoder is bad: "no output pulses".

For failure to thread only (G95 ok):

9. Press Esc to clear following error box.
10. Press "9", then Cycle Start to Establish Home.
11. Observe "Z REFERENCE IN PROGRESS" on screen; slowly turn spindle one complete revolution. "Z REFERENCE IN PROGRESS" should changed to "X REFERENCE IN PROGRESS" while turning the spindle.
If this doesn't occur, encoder is bad: "no marker pulse".

Conclusion
12. Push in E-Stop on Control front panel
13. Move Spindle cable back to Spindle
14. Reconnect Z-Axis cable.
15. Release E-Stop.
16. Set Servos on.
17. Re-establish home