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The short-term downtrend continues. It took just two days early in the week for the PMO to go from the top of its range to the bottom. Negative emotions took control of the selling this week, and there were a number of people screaming at each other on CNBC and various financial outlets.

I think that two weeks ago, the Wednesday afternoon rally after the rate hike, followed by the severe selling that started on Thursday, unnerved the people who had remained optimistic about stock prices. It seems as though denial about the bear market is transitioning into anger, and the next phases will be acceptance and then resignation. When we reach the final emotional stages of the bear, we will be in a much better position to see the next bull emerge.

Regarding the short-term status of the market, as always, with the PMO at the bottom of the range, it is time to think about taking some profits on short positions and getting ready for the next short-term rally. 

The bullish percents of the major exchanges are at a very low level, and you don't often see them reach down to this low. This reflects the severity of the selling, and that every corner of the stock market is now being pulled lower. It's interesting to see that the NYSE is now slightly weaker than the Nasdaq.

I added the one-year view of the same chart to show the slow progression of the lower lows. This chart also demonstrates how the market moves in these short-term cycles around a larger trend, which is downward in this case. These are the cycles I like to trade, and depending on how you count, there are usually about nine of them every year.

On CNBC, Melissa Lee asked, "can the breakdown of oil prices and oil stocks be good for the overall market?" I think she was suggesting that oil price weakness might help the Nasdaq stocks that have been hurt so badly. My guess is that the worst may be over for the Nasdaq, but I don't think that it means this is the time to buy. Maybe it just means it is time for the NYSE stocks to lead lower.

Bottom line: I really don't have much more to say this week about the usual short-term, market-timing indicators, and I don't have too much interest in buying for a bounce because things are looking so grim and stock prices are so volatile. But the market is also very oversold, so I don't want to be holding short positions, either. I am about 5% long and 5% short stocks. The rest is cash.

Below is a chart of the bullish percent for the XLE, and it shows that the stocks in this group started selling off about six days ago. It is only a guess and there may be some counter rallies, but I think this group of stocks is done.

This chart is really interesting. The NYSE common-stock-only AD line has bounced four times this year, creating this very orderly and clean downtrend line. The last rally has a slightly weaker look, though. Maybe this is a hint that the downtrend is accelerating a bit, and that the orderly character is giving way to disorder.

I keep watching for hints that yields have peaked. The peak in yields is the next shoe to drop in the bear market. If yields have peaked, then the bad news is that some difficult economic news would be next. But the good news is that if we have a peak in yields, then we are that much closer to the bottom of the bear market. Every bear market has to go through these late-cycle peaks, and we might as well get them over with sooner rather than later.

Here is a chart of the three late-cycle, defensive sectors. Utilities and staples have broken down, and energy is now very close to a breakdown. This is a classic market rotation.

The CRB also looks like it has peaked. This chart is the heart of the inflation that is creating the crisis we see in the stock market, and a breakdown in this trend is very welcome. Let's hope that this breakdown holds.

It is too early to say that we've seen the peak in oil, but this chart is looking like it has potential. 

I tried to short the gold miners this past week, but I had to cover because the trade wasn't working. Will the correlation of gold miners with the Japanese yen start to drag the price of the miners lower? I'm thinking yes, but the support at the current price is huge.

There was this comment last week about the PMO indicator, "How did the PMO signal a downtrend last week? It looks unchanged at the 100 mark?" The PMO didn't indicate a downtrend last week. The downtrend was signaled by the combination of all the short-term indicators that I post, and it is always a judgment call. 

I have a chart list on StockCharts with about 12 short-term indicators, and I scroll through them every day after the market closes. Once you get in the habit of looking at them every weekday, it takes very little time to do. Occasionally, it is tough to make the call that the trend has changed, but most of the time the indicators all line up in one direction. I hope that helps.

Outlook Summary

• The short-term trend is down for stock prices as of June 9.
• The economy is at risk of recession as of March 2022.
• The medium-term trend is down for treasury bond prices as of Jan. 3 (prices down, yields up).