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Last week, the market finally experienced a new short-term uptrend. Stocks gapped up and rallied nicely, while the number of NYSE new 52-week lows dropped to harmless levels.

Of course, there is always something else to worry about in the stock market, and the next concern is the potential market volatility associated with the executive orders anticipated early next week. In addition, I expect to see some stock market choppiness as the SPX gets nearer to a new all-time high.

The PMO index cooperated very nicely last week by showing us some beautiful, white candles, indicating that the majority of stocks are regaining bullish price momentum.

The bullish percents indicators now appear to be pointing upwards, although I am a bit disappointed because the ticks higher are a bit weak. 

The Summation indexes have curled upwards, confirming the new short-term uptrend.

The NYSE A/D line is pointing upwards as well. Now, we would like to see it reach new highs.

The price pattern of this junk bond ETF is now looking quite bullish. If this were a stock, I'd certainly be a buyer. A healthy junk bond market generally favors higher prices for common stocks.

The number of new 52-week lows is looking favorable for owning stocks, as mentioned earlier.

Bottom Line

A new short-term uptrend has begun, but I must remain cautious because there are still plenty of risks and issues to worry about. Although I am currently fully invested, I'm ready to trim holdings if my market indicators don't continue to favor higher stock prices.

Meanwhile, my favorite medium-term market indicator has remained on a sell signal, but just barely. I'm watching this chart every day because it does a good job of warning me when market prices are under pressure.

Another terrific medium-term market indicator to watch is the price performance of these two leading ETFs. If they break down below their uptrends, I'll interpret it as a very negative signal for the general market. 

The technology ETF looked just fine during the week, even though it didn't hit new highs.

The Semiconductor ETF, on the other hand, really looked like there was potential for a breakdown. Fortunately, it now appears to be poised to move higher. In fact, after such a significant sideways price pattern, it may be forming a healthy base pattern and getting ready for a strong move upwards. I won't get too confident, though, until the price of the ETF breaks up and above the October 2024 highs.

The price chart of the QQQ isn't showing much more than a brief touch of its uptrend line followed by a strong move higher, just as it has demonstrated several times over the last few years. This is a bullish indicator.

There isn't much to see here in this next chart, either. The SPX touched a one-year uptrend line and then bounced higher. This is another bullish indicator.

The industrials ETF does a better job of illustrating that the market really did experience a fairly stressful price pullback over a number of weeks. Of course, the price of the ETF had gotten too extended from the creatively drawn uptrend line, so it was vulnerable when the general market was ready to correct. Now, the price chart of the fund looks decent.

Construction stocks are an industry within the industrials sector shown above, so the price pattern looks quite similar. These stocks came under pressure because they were extended, but their stock prices are also particularly vulnerable when yields are rising.

Yields looked like they may have peaked, at least in the short-term, so these stocks were able to find buyers. Also, the terrible news about the fires in L.A. means that there will be strong demand while homes are rebuilt.

The following home builders ETF also found support at its uptrend line.

Defense stocks are also an industry within the industrials sector, and they found support as well.

Financials continue to look really good. These stocks appear to be responding bullishly to healthy economic news and the widening spread between short and longer-term yields.

Cyber security stocks look set to continue their march to new highs. This is a bullish indicator.

Israeli stocks reacted favorably to recent headlines, but traders had been anticipating the news for some time. This chart looks really good at the moment.

I am hoping that this is the last time that I will need to show this chart. The potentially very bearish head-and-shoulders pattern has not yet occurred.

Sentiment toward stocks remains in the fearful range which, from a contrarian's point of view, is the time to be a buyer. Or, I should say, I prefer to be a buyer when the needle points to fear, and to be a seller when the needle points to greed. 

Outlook Summary

• The short-term trend is up for stock prices as of Jan. 15
• The ECRI Weekly Leading Index points to economic recovery as of July 2023
• The medium-term trend is neutral for Treasury bond prices 

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