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"The major indexes tried to bounce at various points this past week, but ultimately fell solidly for the week, right at bear market lows." - Investors.com (IBD), September 30, 2022

IBD said it really well, so why not just quote them. The short-term downtrend continues, as shown by the PMO index below. 

The last trading day of the month usually shows higher volume, but Friday's volume was really strong and as mentioned, it occurred with prices closing at the lows. This is bearish.

Here's a look at the three major indexes. The Dow has clearly lost its support, but the other two don't look as bad. By some miracle, I could see these indexes bounce higher off these lows, but even if they do, I don't see myself trading long. It doesn't seem worth the risk.

We all know that the market is very oversold and that sentiment is at a gloomy extreme. There isn't any doubt that the market is gripped by a bear. The only doubt is about whether the rallies can be traded, so I don't have much more to add this week regarding the short-term.

Bottom Line: My accounts are about 25% long and 10% short, the rest is in cash. I don't think it is worth the risk to be long more than 25%, but the percentage short is up for debate. With the market so oversold, the next bear market rally could occur any day, so being short is a risk.

I have added a number of charts that I thought were worth a look. The small-caps are my favorite short candidate because they look to me like they have so far to fall. I'm not short at the moment, though, because I was stopped out Friday morning on one of the many false rallies.

The NYSE has rolled all the way over and down to the gap created after the 2020 Presidential election. This looks like a decent level of support for a short-term rally.

We are entering the second phase of the bear market where disbelief in the bear gives way to acceptance, and this means that all the sectors are finally moving lower. These sectors are short candidates, in my opinion.

Everyone is watching to see if the market leaders finally succumb to the bear, and it looks as though Apple has topped out. It is painful to see this stock move lower, but the sooner its price corrects the sooner that this bear will be over.

Longer-term yields are still pointing higher. Another milestone would be to see the 30-year break below its uptrend, which would signal the capital preservation phase. However, at the moment the uptrend looks intact.

The only positive thing I have to say at the moment is that prices move in a large cycle that includes corrections and bear markets. The best thing to do is accept that and be prepared.

Outlook Summary

• The short-term trend is down for stock prices as of Aug. 19.
• The economy is at risk of recession as of March 2022.
• The medium-term trend is lower for treasury bond prices as of Sept. 13.

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