Image Source: Pixabay

It's been a rough couple of weeks in the market, as it recently experienced a short-term downtrend. However, the major indexes have held onto their longer-term uptrend so far.

The QQQ was extended, so the pullback was definitely expected, but the correction was made more severe by the CrowdStrike problems. Now, the index tests the uptrend line while we watch closely to see that it holds, as this is where the QQQ could bottom and transition back to a short-term uptrend.

The SPY looks more concerning because of the slight dip below the uptrend line, but I wouldn't make too much of it unless we get another sharp price decline.

We will know the next short-term uptrend has started when one or both of these two indexes pops up above the 21-day EMA with a strong close.

If the market is going to transition from a short-term downtrend to an uptrend, the first would be to have the major indexes close above their five-day averages.

What is so odd about this market is that the large-cap Nasdaq 100 stocks have been moving in the opposite direction of the broader Nasdaq index. I think we would see these indexes in sync if this were a healthy market. This worries me.

The worrisome chart above is offset by the optimistic-looking chart below. Stocks may be pulling back in price, but junk bonds have continued to hold their gains very nicely. A good-looking junk bond market favors higher prices for stocks.

This chart also makes me optimistic about stock prices. Really bad price corrections don't occur in the stock market with the number of NYSE new 52-week lows at harmless levels. Watch this chart carefully, though. These new lows can start to spike higher very quickly.

Bottom Line

I'm optimistic about stock prices, but with a healthy dose of caution. I'll get defensive quickly if needed.

Meanwhile, this chart of the longer-term indicator for the market is pointing decisively higher, and it seems to favor higher stock prices.

I will have a hard time holding onto gold miner stocks as long as this silver-gold ratio is leading the GDX lower. Gold miners have certainly had a good run this year, but I don't like the look of this.

This software ETF continues to look good despite the recent price pullback. This is a bullish indicator.

This packaging index is rallying nicely, and I think it favors both the economy and stock prices.

These two ETFs have broken out and look very good to me. This is another bullish indicator.

Home builders and construction stocks apparently needed a period of price consolidation. Now, these are looking good again.

This small-cap ETF is finally looking like a leader. I'm not sure I would want to own this, but when it does well, it reflects well on the broader market.

Unfortunately, this economic index continues to point lower. As long as the index stays above the 2-level, I usually don't worry about the economy. However, it is starting to get a bit worrisome because of the persistent decline.

I'm hoping that this index will not repeat what happened last November 2023, when it dipped sharply along with stock prices only to reverse at the last minute when it approached the zero-level. I guess it is time to put this index on the list of things to worry about.

Outlook Summary

• The short-term trend is down for stock prices as July 17.
• The ECRI Weekly Leading Index points to economic recovery as of July 2023.
• The medium-term trend is up for Treasury bond prices as of Feb. 1 (yields down, prices up).

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