Short-Term Uptrend Too hard To Call

I'm not entirely sure about the direction of the short-term trend. On Friday, the indexes were strong, particularly the small caps, although the volume was surprisingly light for most of the market.

I am hesitant to call a new short-term uptrend because the market hasn't had a chance to spend any time consolidating at the short-term lows.

I don't think it matters too much though. Most people recognize that after such a strong run so far this year, it is time for a pause.

The momentum indicator on this chart below would indicate that the market could use a couple more weeks of chop before there is another healthy push higher. The lows of the indicator are usually decent buying opportunities with the obvious exception of last fall.

In my opinion, the highs of the momentum indicator aren't a signal to exit the market, but more of a time to sit back and just leave the market alone for a while. Or maybe it's an opportunity to take partial profits.

I use other indicators to tell me when to sell stocks such as the number of new 52-week lows. The level of new lows shown below has definitely trended higher over the last four months which is enough to tell me that now isn't the best time to be an aggressive buyer. But there aren't enough new lows to scare me out of existing positions.

The significant drop in the number of new lows on Friday is encouraging.

The Packaging Index is hitting new highs.  Bullish.

The Small Caps are finally breaking higher. Bullish.

Sector Strength

The ETFs that hold a broad range of US stocks are starting to all skew right which is obviously favorable for the general US market. But some important industries continue to lag, though, which keeps the caution flag up.

Here is the spreadsheet of the leveraged ETFs. It seems late in the medium-term cycle to be buying any of these funds, but it is interesting to watch them gather strength. It gives me a bit of FOMO.

Outlook Summary

The long-term outlook is positive as of Apr-12. 

The medium-term trend is up as of Jan-4.Could be approaching a momentum peak.

The short-term trend is not sure.  

The medium-term trend for bond prices is up as of Nov-16 (prices higher yields lower).  
 

Investing Themes:

Technology, Dividend-Payers

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. The stock market can do well regardless of which political party is in control.