Image Source: Pixabay
 

Finally, we have a market price pullback. Who would have thought it possible? We now need to monitor key technical levels and the corresponding indicators, such as the number of new 52-week lows, to gauge the severity of the pullback.
 

At Investors.com, their signature line in the sand is the 21-day EMA, and it has been violated. The five-day average of total new 52-week highs/lows is still in the black. When it turns red, there will be added confirmation of a price downturn. My assumption is that it will turn red next week, and that it won't be appropriate to buy stocks aggressively again until the indicator turns black.
 

The indexes of the stocks on the major exchanges have both violated their 21-day EMAs. The NYSE actually violated the EMA on Thursday, providing a serious warning that the market was heading lower.
 

The two market-leading ETFs have also violated their 21-day EMAs, although it doesn't look all that bad just yet. Let's see what Monday brings us in the market before getting too wildly bearish in the near-term.
 

The move higher in the PMO index last week turned out to be a bad signal, and the downtrend that started on July 11 is still intact.
 

The drop in the number of stocks above their 50-day moving average started in late July, providing another warning that a downturn was approaching. It was easy to ignore, however, because this market has been giving off warnings for weeks, and all those warnings never amounted to anything until now.
 

The junk bond ETF barely shows any weakness. If this downturn in prices turns serious, then junk bonds will sell off, too. If this ETF continues to look healthy while the market sells off, then it is likely that the dip in stock prices could be a buying opportunity.
 

Treasury yields really pulled back on Friday, which means that there was heavy buying of safe-haven assets. We may finally get a reduction in mortgage rates, but, unfortunately, due to economic weakness showing up in the employment numbers. 
 

The level of NYSE new 52-week lows was quite elevated on Friday, but there was a hint of a problem even on Wednesday and Thursday, as they were starting to become elevated. If you are looking for signs of trouble brewing in the stock market, this is my favorite chart to watch.
 

Here is another look at the five-day average of net new 52-week highs/lows. As you can see, it turns down frequently, and I think that when this occurs, you need to be cautious for a bit until the indicator turns up again, or until the downturn is confirmed in the other charts. For me, when these candles are red, I'd be out of any leveraged bull ETFs and off margin.
 

This longer-term market indicator turned down on Friday. I won't be buying much stock until this indicator turns positive again. Also, as many people know, August and September are difficult months for stock prices. It might turn to October before I do much buying.
 

Bottom Line

I stated that I might not buy much stock again until October, but I also need to think about how much more selling I need to do. As mentioned, we need to see how the market behaves before getting too bearish towards stock prices, so it is still too early to know

On Thursday, I reduced all my holdings to a quarter position, and I used the cash to buy leveraged bear ETFs. That worked out well on Friday, but I can't imagine holding the leveraged ETFs for another two months.

Meanwhile, I'm short the European stock market using an inverse ETF. This chart looks extended to me.
 

This next ETF certainly looks extended, although there are so many armed conflicts in the world, I'd be more inclined to buy pullbacks rather than sell.
 

Here is another look at technology stocks. The Semiconductor ETF never made it into a new high. I think if either of the ETFs broke below the horizontal support lines, then we would be in the territory of a substantial correction.
 

Outlook Summary

• The short-term trend is down for stock prices as of July 11. There was a bad signal last week.
• The medium-term trend is neutral for Treasury bond prices.

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