The short-term uptrend continues, but the PMO index is now at the top of its range which means that the best time to buy is over. Now I have to be a little more selective about purchases. Also, with the election around the corner, I'm getting cautious sooner than usual in a short-term uptrend.

This chart is a reminder to me that when the PMO is at the bottom of the range, and the market signals that it is getting ready to move higher, I have to act quickly and deploy available cash to take advantage of the new trend. I've been investing and trading stocks using this technique for a long time, but I still need to push myself to step in and buy stocks when to market says that it is time.

Of course, you have to be cautious when a new uptrend is starting because it can fail. But I would rather be prepared to take the relatively small losses of a failed new uptrend than to miss a significant buying opportunity.

The NDX came to life on Friday. A number of tech leaders broke above buy points this past week, so it wasn't too surprising to see the NDX index show such nice price action. 

Assessing the health of the market by monitoring the individual market leaders is a new technique for me, and it feels good to learn something new. I've also been doing scans of equity-ETFs to see how many are breaking to new highs, and there are quite a few showing strength.

The last couple of weeks in October might be a good time to be cautious, but after that, I suspect the market will be ready to move higher. The only problem with this opinion is that everyone else is thinking the same thing.

The technical action of junk bonds continues to be positive with its stochastic pointed higher. This is a very nice looking chart for people like me who use junk bonds to help time their short-term purchases of stocks. The stochastic will soon be at the top of the range which is another signal that the lower-risk window of opportunity to buy stocks passes quickly.

The gold miners may be starting another move higher. I like the looks of this chart because of the base the ETF is forming and the turn higher in the momentum indicator. But then again, I am biased in favor of gold miners after doing so well owning them in the 2000-2007 period, so I need to remind myself to be objective. 

The solar stocks have been a very good trade, but profit-taking wouldn't be at all surprising because they really look extended.

Here is a look at the monthly chart. It's been quite a move. A lot of people are saying that this move was due to the prospect of a Democrat in the White House. I think that is partly true, but I also read that Australia has been rapidly increasing their use of solar after the devastating fires they experienced six months ago, and the new demand has really helped these stocks.

The semiconductors are in rally mode again. The daily chart looks nice as the index breaks out of a base with a fresh cross over from the momentum indicator. If you look at a monthly chart, though, this is another index that is really extended. I'm a buyer of this group, but I'll exit quickly on any weakness.

The Longer-Term Outlook

The growth rate of M2 dipped last week. That's a bit of a surprise, but let's not make too much out of one week's data point. There were several declines over the summer too.

The ECRI index is leveling off. I think as long as this indicator remains above the two-level then we can expect stock prices to advance.

The cumulative net advance/declines and the cumulative net up/down volume both look healthy for the broad market.

Small caps really perked up this past week. It is always a good sign for the broad market to see the smaller companies doing well.

This chart is a concern again, but I've been highlighting this chart for a number of months and stock prices just keep pushing higher so I'm not sure what to think.

Bottom Line: I think the charts are telling us to expect higher stock prices in the weeks ahead even though there are plenty of worries. 

Regarding bonds, the TLT has been in a trading range for most of 2020 (except for one very bad week early in June), but it gapped down below support this past week. The TLT is still within a longer-term uptrend, but in the medium-term, I think we should be prepared for price weakness.

Outlook Summary

The medium-term trend is near the top as of Sept.12

The short-term trend is up as of Oct. 1.

The economy is in expansion as of Sept. 19.

Contrarian Sentiment favors higher stock prices as of Oct.1.

The medium-term trend for Treasury bonds is down as of Oct.10 (prices lower, yields higher),

Strategy During a Bull Market

• Buy large-cap stocks and ETFs at the lows of the medium or short-term market trends
• Buy small-cap growth-stocks on breaks to new highs in the early stages of market trends
• Reduce buying when the market trend is at the top of the range
• Take partial profits when the market uptrend starts to struggle at the highs

Trader Discipline

• Don't be afraid of corrections because they are opportunities
• Never invest based on personal politics
• Take pride in sticking to the trading plan
• Don't give in to fear, greed, or anger