The Short-Term Trend Is Weak

The market is having trouble pulling it together to launch a short-term rally. It has me worried.


The bullish percents were showing signs on Thursday that a rally might be taking shape, but then on Friday struggled.


Based on a basic momentum indicator, the market should be ready to rally or at least move sideways.


The larger context for the market shows one reason why the current short-term trend is stalling out. Prices are pushing up against huge resistance, and this is after a sharp rally that is now probably in need of a rest.


This is my go-to chart. The number of new 52-week lows remains elevated. It is a signal that there is still selling pressure that warns against new purchases. When the market is ready to rally, the number of new lows will drop way down to a very low level.


Bad news for the longer-term outlook of stock prices. The ECRI index took a sharp turn lower this week and looks ready to drop down below the zero-level again.

If the indicator continues to dip it means that the economy will probably continue to show weakness in the months ahead instead of gradual improvement. The probability of stock prices breaking out above this two-year resistance would be a lot higher if the ECRI index were pointing upward.


Bottom line

The short-term trend is weak, the medium-term trend looks to be peaking and the long-term outlook has turned cautious.I'm a seller.

The Sector Spreadsheet doesn't show much that encourages me. TLT is outperforming SPY which favors bonds over stocks. That isn't what we want to see.

The Sectors show continued strength in the leaders, and weakness from the laggards. We want to see the market start to broaden its strength, not narrow.
 


Here is a look at the levered ETFs. I see lots of red, and one curious green with Russia now among the leaders.

Oil prices ticked higher this week perhaps due to global tension with Iran which helps Russia, but that isn't the type of trade I am likely to follow.

Also, notice that the SPX has fallen off the leader list.
 

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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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