Looking For Short-Term Downtrend

The short-term uptrend continues, but it is time to be looking for the next short-term downtrend.

For me, this means that I am now taking partial profits from my winners, and I am selling the weak positions. I do this so that I lock in some profits, but also so that I am less inclined to panic when the general market takes another dip.

The truth is, though, that there aren't as many winners in my accounts as in the previous short-term cycles, and that is because of the startling rotation out of the growth stocks that began abruptly on Monday, Sept. 9. It means that in this cycle I am closing positions that have been successful for a long time.

I'm not saying that they won't be back as leaders, but for now, they are out of the portfolio because that is how I avoid big losses and stay invested in the areas of the market that are working the best.

There were signs that growth wasn't working such as this ETF shown below.

The 10-day call/put has turned lower (inverted put/call) which hints at the next short-term decline.

The SPX Summation is just starting to falter.

Moving on to the longer-term outlook.

Just when I was getting very pessimistic, Industrial production has turned upwards again. Bullish.

"Industrial production is a measure of output of the industrial sector of the economy. The industrial sector includes manufacturing, mining, and utilities. Although these sectors contribute only a small portion of gross domestic product (GDP), they are highly sensitive to interest rates and consumer demand."

This is a chart everyone was looking at a few months ago. Not much has changed but it is worth revisiting. The previous two bull markets for stocks ended near the peak in short-term rates and employment. We have a peak in short-term rates, but no signs yet of a peak in employment. For now, Bullish.

Another chart that everyone was looking at a few months ago. There was a high correlation between Semiconductors and the China ETF, but this summer the two went their separate ways.

Semiconductors touched new highs while China looks like it wants to retest its 2018 lows. Can the divergence continue? I am calling this one, Bearish.

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Disclaimer: I am not a registered investment advisor. My comments above reflect my view of the market, and what I am doing with my accounts. The analysis is not a recommendation to buy, ...

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