New Short-Term Downtrend On The Way

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).
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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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