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The PMO index has turned lower, and there is no doubt that the market has been struggling since Labor Day. Did I declare an uptrend too soon, and is the market about to make a significant move lower?

This chart shows that the major indexes have fallen below their five-day averages (the first requirement of a short-term downtrend), but so far the NDX and the SPX have held above Aug. 29's big rally. Also, the Dow is still above the lows of August, so I don't think the indexes look that bad. I'm guessing the market is putting in a short-term double-bottom price pattern, so for now I am going to stick with my Aug. 29 call that a new short-term uptrend started.

These bullish percent indexes certainly confirm that stocks struggled this past week, and they do look like they could fall further. So, this chart is a concern.

The junk bond ETF has held up nicely, and it seems to be hinting that stocks will pull through in the short-term. This chart is telling me that we may be experiencing a weak September. If this ETF breaks down below the uptrend line, then I will become concerned.

This chart shows the momentum of the SPX advance/decline line, and it looks to have turned upwards very nicely just as August ended. I love these clear, smooth signals. This chart is saying that, so far, despite the past week of selling pressure, the A/D line's momentum is heading higher. So, this chart appears to favor higher stock prices in the short-term.

The buy-write indexes shown in this chart are not demonstrating the weakness of the major indexes. These indexes are usually the last to roll over when the market is weak, and they are often the first to rally when the market bottoms out.

This chart seems to be telling me that the short-term uptrend is intact. I should note, though, that there is still a bit of concern to be seen here because these buy-writes are still well below the late-July highs, and usually they blow past the previous highs quickly.

Here is a nice look at the buy-write that shows how it bottoms and rallies just before the A/D line momentum indicator gives its buy signals at the short-term lows. This charts seems to suggest that there is a decent chance that the market just needs to get past its September jitters before prices move higher again.

I am going to stick with the view that stock prices are weak because of the poor seasonal period, and the indexes need to complete a short-term double-bottom price pattern before moving higher. But if the selling pushes the indexes much lower, I will not stubbornly hold to my view, and instead I will admit my mistake and take my losses.

I'm about 90% invested at the moment, and I will continue to aggressively reduce the size of holdings that are weak in favor of cautiously adding to holdings that are strong. 90% invested is too high of a percentage considering the current market conditions, but I have been drawn into the market by the favorable price patterns I'm seeing in leading stocks.

The ECRI Weekly Leading Index has ticked higher nicely after a bit of a pullback and is still well above the zero level, and this makes me optimistic about stock prices.

Despite seeing approximately four months of bond yields rising, they are still within a range established in 2022. There were a couple days there in mid-August when it looked like yields were going to take off, and the price pattern still looks favorable for higher yields, but there hasn't been a solid signal yet and they remain range-bound. Remember, as bonds sell off, their yields rise.

Outlook Summary

• The short-term trend is up for stock prices as of Aug. 29.
• The ECRI Weekly Leading Index points to economic recovery as of July. 2023.
• The medium-term trend is uncertain for Treasury bond prices as of February 2023.

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