New Short-Term Downtrend On The Way

The Short-Term Trend

I think we have a new short-term downtrend, as shown by the PMO index. However, the market still seems very reluctant to move lower or to even pause in its advance.

The 10-day Equity-Only Call/Put has rolled over from a high level, helping to confirm the new short-term downtrend.

The SPX equal-weight ETF looks like it could pause here, and its stochastic is now pointing lower.

The NYSE bullish percent has a similar look. The index is near the top of its range and the stochastic is pointing lower.

The momentum of the SPX has topped out a bit in the short-term.

There are other charts of indicators that haven't rolled over yet, so my confidence that there is a new short-term downtrend trend is low. I wouldn't be at all surprised to see a few choppy days in the market followed by another strong rally higher.

The chart below shows one reason why I suspect the market still wants to move higher. This ETF of the high growth small-caps has consolidated and formed an excellent base. Now it is struggling just a bit at the top of the range, and to me, it has the look of an ETF that is ready to make a strong move higher and into new highs. I'm not sure it is willing to wait very long.

My accounts were at about 20% cash last week, but now it is closer to 10%. My cash has been lured back into the market by some of the gold stocks that have consolidated very nicely, and by accumulating some of the solar and alt-energy stocks that have pulled back in price recently. If the market starts to get wobbly, then I'll need to raise cash back to the 20% level by taking partial-profits off some of the technology winners.

The Longer-Term Outlook

The money supply growth dipped a bit last week. Nothing to worry about yet, but I am keeping my eye on this chart because I suspect the inflation-sensitive and rate-sensitive areas of the stock market are very sensitive to the money supply growth rate at the moment.

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Disclaimer: I am not a registered investment adviser. My comments reflect my view of the market, and what I am doing with my accounts. The analysis is not a recommendation to buy, sell, ...

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