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Last Friday's break out of a well-defined short-term consolidation was followed by a nice-looking push to new highs. This is a bullish indicator.

The PMO index is back at the top of its range. When the PMO is at this level, I start to raise some cash in order to capture profits and to have some cash available when stocks inevitably pull back in price and offer opportunities to buy.

The top panel of the NDX in the chart below shows just how shaky the market behaved last Tuesday, when the semiconductors and many of the leading technology stocks sold off dramatically. However, the lower panel of the chart shows a very steady SPX that held above the 5-day average quite well (the first sign of a market ready to experience a short-term downtrend is a close below the 5-day for these two indexes).

The bullish percents didn't acknowledge any of Tuesday's market weakness. This is a bullish indicator over the short-term.

The Summation indexes are doing a really good job of showing us the market's short-term cycles of uptrends and downtrends. I like to buy near the lows of the cycle and sell near the highs of the cycle.

The number of new 52-week lows is at harmless levels for both exchanges. When the stock market is generating so few new lows, it seems to favor owning stocks for price appreciation. This is another bullish indicator.

Bottom Line

I raised about 10% cash on Thursday and Friday based on the fact that the PMO has been at the top of its range, which is where I resist making new purchases and take partial profits. I also continue to be nervous about being too complacent about the stock market just weeks before a Presidential election, but so far my nervousness about the election hasn't been justified.

Next, this is my longer-term indicator of the health of the stock market, and it couldn't look more favorable towards owning stocks. My only concern is that the indicator looks extended.

Longer-term Treasury yields have been trending higher since mid-September, and now they look to me like they are ready to give us an important signal about where they will be headed for the remainder of the year. 

If these yields break above the downtrend lines, it means that bonds are being sold and prices are moving lower (and vice versa if yields drop below the horizontal support lines). However, I'm not sure what that would mean for stock prices, at least in the short-term. 

If I had to choose, I think that I would prefer to see slightly higher longer-term yields because that would point to economic growth -- which in turn favors higher stock prices.

The number of bullish-looking ETFs is amazing at the moment. The bull market has broadened out to numerous areas of the market. The ETF shown below is one of many opportunities.

This next ETF is looking very good too, but it hasn't yet broken out. It certainly looks like it will break out sometime in the weeks ahead, though.

Outlook Summary

• The short-term trend is up for stock prices.
• 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).

More By This Author:

The Short-Term Downtrend Is Unclear
A Difficult Market Until October
Prices Pushing Up Again