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The SPX spent the last week or so near its all-time highs, as it was seen moving sideways. The price stalled a bit, but the chart has continued to look really good, with the price respecting the uptrend line and the number of NYSE new 52-week lows at harmless levels.

The SPX has also continued to respect the 21-day EMA, which is so highly regarded as a technical level at Investors.com.

However, market breadth is still well under the levels seen in 2024, which means that a much smaller percentage of stocks have been leading the market higher than last year. This is an underappreciated negative for the general market.

The stocks in these two ETFs are largely responsible for the success of the general market since the April lows. As long as these two ETFs look good, then the general market looks good, too.

Even the strongest bull markets experience short-term downtrends, and I believe that we are really close to one based on this chart of the PMO. None of the other indicators support the view that a new downtrend has started, so even though I have labeled this as a downtrend, it is really just a warning that a downtrend is very close.

I'll also mention that there is a PMO index for each of the major averages, and, even though I have not shown the charts, all of them are now pointing lower. So, this seems to be a warning of a short-term downtrend.

The NYSE barely closed below its five-day line, and the Nasdaq closed above. This chart really doesn't support the view that a new downtrend has started.

The percentage of stocks above the 50-day line turned lower for both exchanges on Friday. This is not all that convincing, however.

The bullish percents haven't budged. This chart definitely doesn't seem to suggest a new downtrend.

Nothing negative can be found in this chart, either.

Junk bonds showed a bit of weakness this past week. That is nothing to worry about, though.

New 52-week lows remain harmless on both exchanges.

The chart below has been suggesting for a number of weeks that it is time to get cautious towards stocks. Extreme greed suggests that everyone is now expecting higher stock prices, and that perhaps it is time to be cautious.

Bottom Line

The market looks to be ready for a pullback. Traders are too confident and complacent regarding stock prices. I have raised cash by reducing all my holdings so that they are half-positions at best, and I have started hedging by buying inverse ETFs of the major indexes. It is time to be cautious by raising cash and taking partial profits.

Meanwhile, this medium-term stock market trend indicator has continued to point upwards.

Stock market bulls are counting on a boost to stock prices when the Fed lowers rates later this year. I'm skeptical. I am not sure that there will be a cut.

The 2-year Treasury yield continues to be under the Fed Fund Rate, which means the most likely next move for the Fed is to reduce rates. However, I'm watching the 2-year yield closely because it really isn't weak enough to force the Fed to lower rates.

The money supply has continued to point higher, which is generally a good sign for the economy and stocks. I feel as though the economy has to be fairly weak for the Fed to lower rates while the money supply increases like this.

At some point soon, the 30-year yield is going to break out above the recent high in yields. This could provide a temporary shock to stock prices.

Pring's inflation indicator is now pointing decisively higher, which also works against the notion of a Fed Rate hike.

Outlook Summary

• The short-term trend is warning of a downturn for stock prices as of July 12.
• The medium-term trend is neutral for Treasury bond prices. 

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