A new short-term uptrend started on Tuesday, March 15 after a very brief short-term downtrend. It also occurred after a really bad day in the markets on Monday. Apparently, traders liked what they heard from the Fed on Wednesday. Combine that with the very oversold stock price levels and the pessimistic views towards stocks, and the trend flipped upwards.

There is a chance that the larger, medium-term trend also changed this week, as IBD flipped from "correction" to "confirmed uptrend" after a follow-through day was recorded. In addition, some of the major indexes broke above their well-defined downtrend lines.

I was quite bearish towards stocks last weekend, so I will discuss this later in this text.

From Tuesday through Friday, the major indexes were above their 5-day averages and closed at their highs in strong sessions.

The SPX showed some bullish action as it avoided a lower low early in the week, followed by a short-term higher high on Friday. In addition, there was fairly good upside trading volume on Wednesday and Friday.

It gets a little more difficult to look ahead to next week because the PMO index is already near the top of its range, which means the low-risk period to make purchases has already closed.

As mentioned earlier, some of the major indexes moved above their downtrend lines. As a result, the remaining shorts had to cover. As well, the reluctant buyers had to step in as the downtrends were broken. The strength of the rally will be measured by how well the indexes turn their former resistance into support.

The bullish percents, after just four days, have gone from oversold to overbought levels similar to the chart of the PMO index. This is another indication that, for short-term gains, the best time to buy has already passed.

The SPX and NDX buy-write indexes have broken above early buy points, and the SPX is pushing towards the old highs. The Dow buy-write index, as shown in the bottom panel, is now, much to my surprise, at an all-time high. In addition, it never really showed a lot of weakness and the larger trend didn't break down. 

New 52-week lows dropped off dramatically, which confirmed the new uptrend. If and until the number of new 52-week lows starts to rise, you have to be optimistic about stock prices.

Last weekend, and early in the week, there was a number of traders suggesting that it was time to get bullish towards stocks, and I believe it was this chart that provided optimism for most of these traders. Over the past couple of weeks, the VIX showed a very nice bullish divergence when it topped out (bottomed in this chart) on March 4 -- well before the SPX, which bottomed on March 14.

Adding to the new optimism this week was the price action of the CRB, which pulled back based on the weakness in oil prices and a number of other commodities.

I was quite bearish towards stocks last weekend and I was convinced that there would be another leg down for stocks. For a day and a half, that bearishness seemed to be correct. However, the bullish action near the close on Tuesday hinted that the selling had dried up and that traders had decided to cover shorts going into the Fed meeting on Wednesday. 

Traders tend to be neutral on the market going into Fed meetings, and that was a really important meeting, so it was a fairly big miss on my part. However, I'm much better in my old age at admitting when I am wrong and adjusting quickly rather than fighting against the trend just to try to prove that I am right. 

I covered most of my shorts near the close on Monday to capture profits. Unfortunately, because I was so bearish, I added some of the shorts back mid-day Tuesday on the predictable bounce in prices after the weak showing on Monday. But the market surprised me and rallied into the close on Tuesday. By Wednesday morning I realized I was on the wrong side of the market, so I closed out the shorts before the Fed meeting.

Even though I gave back too much of my profit with a bad trade on Tuesday, I'm going to credit myself for at least not being a stubborn old man. Instead of digging in, I admitted to the mistake and adjusted quickly.

Looking back on the week, I think it is okay that I was wrong about another leg down in the market and I'm happy with my flexibility. What I am not happy about is that I really should have been content with the gains available to me on Monday, and I shouldn't have added back to the shorts on Tuesday.

I have no ability to get in just at the right time and then get out just at the right time. I have to be content with capturing a big part of the move and then sitting it out while waiting for the next low-risk opportunity.

For two months now, the short-term trends have been very brief, and the PMO index has been unable to reach all the way up or down to the extremes of its range, which has made trading a little more difficult. This is all the more reason for me to be content with gains.

Bottom Line: I have no short positions and I am about 20% long with a few stocks and a few bull 3x funds.

I found the chart below in one of my old chart lists, and I think it has probably been there for 15 years or so after copying it from one of John Murphy's blog posts. I had forgotten about the yen/gold correlation, and it makes me think it is time to go back and read some of Murphy's best work on intermarket correlations in order to better understand the current market and its focus on commodities.

Here is a quote I found:  "The yen is one of the most important alternatives to the U.S. dollar among fiat currencies. This is why there is often a positive link between the yen and gold: both assets are negatively correlated with the greenback and both are considered safe-havens."

Based on this chart and the weakness it shows in the yen as it points straight down, I'm not so sure I would be a long-term buyer of gold and the miners.

Here is a chart of the Mexico stock ETF that has been breaking out very bullishly. I'm a holder and I like the looks of this a lot. Check out the weekly chart when you have a chance because it looks good as well.

Outlook Summary

• The short-term trend is up for stock prices as of March 14.
• The economy is at risk of recession as of March, 2022.
• The medium-term trend is down for treasury bond prices as of Jan. 3 (prices down, yields up).