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The majority of stocks appear to be in a short-term downtrend or sideways consolidation, but the leading stocks have continued to push to new highs. 

The chart below starts us off by showing the general market with advance/decline momentum pointing lower along with the PMO index below the 50-level, and this indicates that most stock prices are showing weak price momentum.

Here are the two leading cap-weighted indexes, and even though the majority of stocks are showing short-term weakness, these indexes couldn't look better.

Here are the two equal-weight ETFs. They don't look bad, but they are seriously lagging the cap-weighted ETFs shown in the chart above. 

The two sets of ETF charts illustrate how the leading stocks, as shown by the cap-weighted ETFs, are pushing higher and dominating a market that is otherwise in a short-term downtrend, as shown by the equal-weighted ETFs. 

The bullish percents are also pointing lower, supporting the notion of a short-term downtrend. The Nasdaq is stronger than the NYSE, which is a bit of surprising strength.

The Summations have continued to point decisively lower, as well.

There were a lot of new 52-week lows on Friday, and this has my attention. The number of new 52-week lows is telling us that the general market is under selling pressure despite the new price highs for the major indexes.

There is nothing new about the excessive number of new lows on the Nasdaq. This has been the case for quite some time, and even though it is worrisome longer-term, it doesn't seem to be an issue short-term. 

However, the number of new lows on the NYSE has me worried. If the PMO index shown in the first chart were at the bottom of its range and there were a lot of new lows, then that would be normal behavior for a market getting ready to find a short-term bottom and transition back into an uptrend. But with the PMO at the 40 level, it doesn't exactly match the bottoming behavior in the past, and it could be the case that the market is getting ready for another leg lower.

I don't like it, but I certainly don't know for sure what will happen next. 

Bottom Line

The leading stocks have pushed to new highs, and I think most people would agree that they are due for a rest in the short-term. So, if the leaders rest, does that mean that without their price strength, the general market has another leg lower in the short-term?

There are a lot of oversold areas of the market. Perhaps, instead of a general market decline, we will see another period of rotation out of the leaders and into the laggards. 

I really don't know. And since I don't know, I'm playing the market cautiously at the moment.

I apologize if the following charts are presented a bit randomly. I'm on a deadline today. European stocks have had a nice run to new highs similar to US stocks, but now they look ready for a pullback or consolidation.

It looks to me like this longer-term indicator could be ready to roll over. I've included the chart settings so that readers can re-create the chart.

Dow Theory is showing a non-confirmation, with the transports not following the industrials to new highs.

The Dow Transportation Index is price-weighted, and the ETF below shows the transportation stocks in a traditional cap-weight. This ETF did hit new highs this past spring, and the chart really doesn't look that bad.

However, this chart does look bad. This is a fairly clean breakdown of what was a bullish-looking price pattern set up a few months ago.

The medium-term trend for bond prices flipped upwards over the past two weeks (yields down, prices up). Yields are now looking decisively lower.

Large-caps and small-caps started pointing in opposite directions in late May. I used to think the health of small-caps was extremely important for the market, but now I'm not so sure. I do think that they will eventually trend together, so one of the two indexes will need to change direction.

Here is the market's most important chart, so I saved it for last. These are the market leaders. If you own these, you are likely doing very well. Despite all the charts I've reviewed and all the chatter in financial media, if these two indexes continue to push higher and above these trendlines, then I'm going to want to own stocks, and most other people will likely take the same view. This is a bullish indicator.

Outlook Summary

• The short-term trend is uncertain 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).

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