Short-Term Uptrend Needs Confirmation

I believe that a short-term uptrend started on Friday, but it still needs to be confirmed by an up-tick of the PMO Index.

The 10-day Call/Put started ticking moving on Thursday.

The Bullish Percents ticked up very nicely on Friday.

The long-term outlook for the economy and stocks was upgraded last week from caution to weak growth based on the move above the zero-level by the ECRI-Index. That means I give myself permission to sell some bonds and deploy the proceeds into stocks.

The chart below shows that we've had two other ticks above zero this year, but both of those quickly reversed lower. So, obviously, it wouldn't surprise anyone to see the index turn lower again just like it did in May and August. However, you have to have a line in the sand somewhere, and the zero-level is the line I have chosen. The ECRI isn't the only consideration in my trading plan, but it is the most important factor.

The improvement in the ECRI comes at a good time based on these charts below. They look like they are building healthy bases that might be getting ready to break higher.

With all the weak economic indicators in the news, it is obviously important to remain alert. But I have to follow the indicators. Otherwise, I invest based on my emotions and that's a good way to lose lots of money.

One last thing. I think the trend for yields has probably switched to higher (prices lower, yields higher).

Outlook Summary

The long-term outlook is weak-growth as of Oct. 5.  

The medium-term trend is up as of Sept. 4.  
The short-term trend is up as of Oct.11. 
The medium-term trend for the price of bonds is down as of Oct. 11 (prices lower, yields higher). 

Investing Themes:

Large-Caps, Semiconductors, Technology, Infrastructure, Retail, Home Building, Defense, Utilities, Water, Dividend-Payers, Consumer Goods 

Strategy During a Bull Market:

• Buy large-cap stocks and ETFs at the lows of the medium or short-term market trends
• Buy small-cap growth stocks on breaks to new highs in the early stages of market trends
• Reduce buying when the market trend is at the top of the range
• Take partial profits when the market uptrend starts to struggle at the highs
• The cardinal rule is never invest based on personal politics because the stock market can do well regardless of which political party is in control