Image source: Pixabay

The uptrend line finally broke on Friday, Oct. 10, and the market has struggled since then. However, looking at this chart, after that awful Friday period, the following sessions really haven't been that bad.
 

The SPX equal-weight hasn't performed as well as the SPX capital-weight, but it also doesn't look too bad at the moment.
 

The two most important and leading ETFs are both still trading above their 21-day EMAs. In my opinion, these are the best indicators regarding the health of the market, and they are looking good.
 

The PMO is down at the bottom of its range. Whenever this sort of movement occurs, the market is short-term oversold, and this is when I start to look for buying opportunities.
 

Good news, Friday's session closed above the five-day averages for the two major indexes. A new uptrend can't really begin until there is a close above the five-day average.
 

Bad news, the bullish percents are both pointing decisively lower. With this chart looking like this, we probably have a few more days to go before the market starts to trend upwards in the short-term.
 

The summations may have leveled out, but there hasn't been any indication yet that they are headed higher.
 

The price of this junk bond ETF tumbled along with the market, but over the last three sessions, it seemed to have headed higher. Strength in the junk bond ETF is often a good sign if your inclination is to be a buyer of stocks.
 

The weekly junk bond ETF chart shows that the major weekly uptrend line wasn't broken; once again, good news for stocks. This is certainly an appealing-looking chart.
 

I believe Friday was an options expiration day, and that may explain the strength shown in the buy-write indexes on Friday. A strong uptrend in these indexes can be a good signal of stock market strength.

Next, here is a look at the weekly version. A break below these moving averages would be a decent signal to raise cash. Consistent closes above the moving averages should be used to keep us invested in stocks.
 

Friday was a really rough session for new 52-week highs because there were barely any recorded. This is not a good signal for stocks, but on the other hand, there weren't enough new 52-week lows to be concerning.
 

Yields continue to drop, which means that people are buying bonds. Treasury bonds are purchased when there is stress that moves investors towards safety, or if inflation expectations are coming down. I think both conditions are true at the moment, although I still worry about the inflationary impact of tariffs. Lower yields are generally considered positive for stocks unless whatever conditions causing stress are expected to take down the economy.
 

In case you haven't heard, here is some of the news behind the market weakness last week:

"Last evening, FT reported that banks have received over $15 billion from the Fed's standing repurchase facility over the past two days, which is the highest total since the start of the coronavirus pandemic." Briefing.com, Oct. 17

This action was taken due to charges against earnings taken by two regional banks due to the bankruptcy of First Brands, an auto parts supplier, amid allegations of fraud and weak lending practices by private lenders.

Bottom Line

I am looking forward to the opportunity to start trading again using short-term market signals, but at the moment, my trading strategy has been to simply buy top-quality stocks that are in uptrends, and to continue holding as long as they trade above their own 21-day EMA.

Outlook Summary

• The short-term trend is down for stock prices as of Oct. 10.
• The medium-term trend is neutral for Treasury bond prices.

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