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The SPX index hit a new all-time high on Thursday, but it then closed well off its high. Following that, the index was indecisive on Friday. So, the breakout wasn't the best, and combined with the nervousness surrounding the election, I'm thinking that the market will continue to be difficult until the end of October.

The PMO index is near the top of its range, but it hasn't reached all the way to the top, which I'm interpreting as another sign of market indecision.  My guess is that this index will turn downward in the coming week.

The bullish percents aren't hinting at much weakness, although the NYSE BP is below its July high while the SPX index hit a new all-time high. I would say that is a mild negative divergence that is worth taking note of, but not to be made too much of.

Watching this junk bond ETF has certainly been helpful recently, as the market has struggled while the high-yield corporate bond market has pushed to new highs. The strength in junk bonds helped keep the faith that stock prices would eventually make their way higher, too.

The number of NYSE new 52-week lows remains subdued and therefore at harmless levels, even though the Nasdaq new lows continue to be elevated. As long as the NYSE new lows are subdued while the PMO index is near the highs, I'll remain optimistic about stocks. The Nasdaq's new lows, on the other hand, have been at levels that are too high for a very long time. Even though it makes me nervous, I have to concede that it isn't an immediate issue.

Bottom Line

Going into the close on Wednesday, I was 100% invested in growth stocks. So, I had a good day on Thursday and took some small profits, and then I took even more profits on Friday. With the PMO index near the top of the range, we will be on watch for the market's next short-term downtrend.

The chart below helps to track the longer-term trend of the market, and with it currently pointing solidly higher, it gives me confidence to have a sizable portion of my accounts in stocks, even during the short-term pullbacks in the SPX.

The commodity ETF continues to hold above its significant support level. Holding above this level is an important sign of economic strength, and it eventually will favor higher stock prices.

Longer-term yields popped up just a bit late last week, and the bond market adjusted to lower inflation but continued economic growth. Low yields combined with economic growth point towards owning stocks.

The software ETF IGV hit a new high last week, although its price action isn't convincing just yet. This is a tremendously bullish-looking chart.

The IYC ETF hit a new high as well, and it also looks like it is going to head higher.

Emerging markets look good based on these two ETFs. Lower US yields often push up foreign currencies, which helps emerging stock markets.

These two ETFs have continued to head higher still.

I'm an owner of building and construction stocks, and the main reason is because of this chart. It illustrates a steady climb into new highs.

The broader ETF that holds the stocks of the two ETFs above is in the chart shown below. This is a good-looking chart. I'd be a buyer on weakness.

These two extremely important, market-leading ETFs are coiling and consolidating sideways, as they look to be preparing for the next big move into new highs. If they see a Friday session close below their uptrendlines, then it would be time to reassess the health of the entire stock market.

Talk about nice-looking charts. The breakout of gold is a thing of beauty. I'm not a buyer for other reasons, which I hope to discuss soon.

There was a Fed rate cut this past week. It isn't reflected in the Fed Rate index yet, but I'm showing this chart now so that you can see that the Treasury market was telling the Fed that it was time to lower its borrowing rate. Despite all the discussion on TV about when, why, and by how much the Fed will alter the Fed borrowing rate, it is shorter-term Treasury yields that actually decide for the Fed what their next move will be.

Outlook Summary

• The short-term trend is up for stock prices as of Sept. 11 
• The ECRI Weekly Leading Index points to economic recovery as of July 2023
• The medium-term trend is up for Treasury bond prices as of Feb. 1 (yields down, prices up)

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