The Short-Term Trend Continues

The Short-Term Trend Continues

The short-term uptrend continues, although now with the PMO index at the top of the range. With the PMO at this level, it is time to be on the lookout for the subtle indications that the market might be getting ready for the next pullback in prices.

The market usually spends a few weeks at the top of the range, but with all the news about the election and COVID-19, it probably is a good idea to be keeping a closer eye on the market indicators. I'm not worried about the longer-term health of the market, but I would hate to be caught flat-footed if there is a sharp short-term reversal in stock prices.

I don't have much time today, so I will leave it at that regarding the short-term trend.

The Longer-Term Outlook

The ECRI index keeps climbing higher, indicating that the economy will at least be healthy over the next half-year or so.

The NASDAQ looks ready to break out in the weeks ahead.

The Dow Indexes look to be confirming higher prices.

NYSE cumulative advance/declines are supporting higher stock prices. If this were a stock, I'd be a buyer.

Here is the chart that I don't like. The 10-day average put/call has been well into the caution range for most of the year, thus indicating too much bullishness. At some point, this will be an issue.

Another sentiment warning from insider selling.

The Investor's Intelligence Newsletter Writers Sentiment Survey is showing the level of bullishness near the 60% level once again, which works against higher stock prices from a contrarian point-of-view.

I am currently holding about 5% cash and looking to increase that to 10% over the coming week.

Outlook Summary

• The short-term trend is up for stock prices as of November 3.
• Contrarian sentiment is unfavorable for stock prices as of November 14.                              
• The economy is in expansion as of September 19.
• The medium-term trend for treasury bonds is down as of October 10 (prices lower, yields higher).