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.

The ECRI index continues to point higher, indicating economic growth four to six months into the future.

The cumulative net new high/low index continues to point higher. Some people have pointed out that the market indexes are at new highs, but this index is not, and that creates a negative divergence. I don't think so. Based on this chart, I can only see market strength starting in about May.

Check out this chart. What a distinct uptrend line. And the COVID-19 sell off in March just brought the index down the uptrend. It doesn't even look as bad as the selling in 2015 or late 2018. Maybe because the selling occurred so quickly?

I continue to believe that it is time to slowly trim from the heavily overweight technology stocks, and let the funds flow into the areas of the market that will benefit as the economy strengthens, inflation perks up, and long-term yields rise.

Outlook Summary

• The short-term trend is down for stock prices as of December 1.
• Contrarian sentiment is unfavorable for stock prices as of November 14.
• The economy is in expansion as of September 19.
• The medium-term trend for treasury bonds is down as of October 10 (prices lower, yields higher).