The short-term downtrend continues, which is stating the obvious. This past week was very rough. The day after Thanksgiving looked like the market might have been getting close to the low of this cycle, but the selling accelerated this past week. My stocks started breaking down, so I was forced to raise more cash.

The major indexes continue to trend lower below their 5-day averages, which confirms the downtrend, although the SPX and Dow showed a little hesitation hinting at a potential low. Wednesday was a very bad day for the entire market, but the SPX and Dow closed above Wednesday's close on both Thursday and Friday, showing just a bit of hope that the selling will ease up a bit short-term.

The bullish percents also confirm the downtrend, and, similar to the chart above, the NYSE might be ready to stabilize. The Nasdaq bullish percent, on the other hand, isn't showing anything to suggest a bottom.

The number of new 52-week lows has been suggesting a serious problem for some time. Similar to the charts above, the NYSE is showing a hint of strength with new lows backing off just a bit. This is in contrast to the weak Nasdaq in which new lows continue to increase.

There have been some really dramatic drops in the price of former Nasdaq leaders, such as this stock that has lost almost 60% off of its value from the peak.

So now what? I show the PMO chart every week as a reminder to myself that the time to be looking to buy is when it is at its lows, not when it is at its highs. My accounts are already in defensive mode, so I'm done selling, and I'm just going to have to take my lumps with my remaining positions if the market continues to move lower. It's too late to sell, and too late to short.

Also, no dwelling on any recent mistakes or missed opportunities. Instead, with the PMO at its lows, it means that I'm looking for the next short-term rally, and watching my indicators for signs that the market is bottoming. I'll be adding to positions among stocks that are either way too oversold or that have been able to maintain price strength despite the storm of selling.

Okay, so I have a plan for the short-term. How about the medium-term? The number of new 52-week lows and the selling among the former stock leaders has gone way beyond the average, buyable short-term pullback. It is serious selling so it deserves respect. 

The past few months remind me of the fall and winter of 2018 when the market fell in October and then just kept falling until early January. I've shown this period in the chart below.

The market internals weakened considerably starting in September as shown by the declining PMO and the rising number of new 52-week lows, but the major indexes didn't come under pressure until October when the SPX finally had a sharp drop below the 50-day. There were some short-term rally attempts and a sideways move during November, but the SPX never really regained the 50-day until January.

With the market experiencing such weak internals similar to this period in 2018, it tells me that I need to hang onto cash until the indicators tell me to deploy it. And, before I deploy any of the cash, I'm looking for a tick higher in the PMO and/or a dramatic decline in the number of new 52-week lows. The signal to deploy all the available cash into stocks would be to see the SPX trading above the 50-day average.

Also, it is important to note that the number of new lows on the NYSE has to decline to below the 50-level and stay there like it did in January 2019. A decline in new lows similar to Nov-2018 where the level remains a bit elevated and creeps upward again tells me that it is a relief rally within a larger decline and to sell into the peak.

Bottom line: Keep a cash cushion in accounts during short-term rallies until the market internals improve similar to January 2019.

What is happening with Treasuries? With stocks under pressure and the Fed focused on raising short-term rates it makes sense to see buying in longer duration Treasuries. This week, the uptrend in yields was broken and I think that now we have to assume that the medium-term trend for bond prices is higher (yields lower). This should help home builders, suppliers, and construction stocks.

Outlook Summary

• The short-term trend is down for stock prices as of Nov. 17. 
• The economy is in expansion as of Sept. 19, 2020.
• The medium-term trend is up for treasury bond prices as of Dec. 4, 2021 (prices up, yields down).