Image Source: Pixabay

Last week, I thought for sure that the market would need more time near the recent lows before it could move higher. However, prices are now pushing up towards all-time highs once again.

The market turned on a dime on Wednesday. It then rallied, with strong follow-through seen on Thursday and Friday. Now, the market is in the early stages of a new short-term uptrend, as indicated by the PMO index shown below.

Tuesday's session close above the 5-day was a strong hint that a rally was brewing (I missed it).

The bullish percents have turned higher and are nicely confirming the new short-term uptrend.

The junk bond ETF couldn't look more bullish, and this tells me that stock prices are seemingly headed higher. The rule of thumb is to trade stocks in the same direction as junk bond prices

This chart shows the correlation between junk bond prices and stock market prices. The July selloff was confirmed in its final stage with a drop in junk bond prices, but the selloff this month was not confirmed. This chart tells me to continue to hold stocks despite the concerns I have about the weeks leading up to the election.

The NYSE new 52-week lows concerned me late last week, as they became a bit elevated and continued to rise for over a week. But now, the number of new lows has declined back to harmless levels. This is a bullish indicator.

Bottom Line

I can't believe I am writing this after feeling so cautious last weekend, but I am fully invested in stocks. Even though I am still concerned that the next six weeks will be volatile and scary before the election, I'm fully invested because the charts look so favorable. I will have to remind myself of this if there are some bad sessions as we approach November.

In the chart below, the SPY looks bullish and ready to hit new all-time highs. The QQQ isn't as close to the July highs, but it looks bullish nonetheless. It bounced twice off its green 200-day average to form a higher low. This is another bullish indicator.

This next chart points higher, and it continues to favor stock market prices.

Commodity prices looked so ready to sell off last week, but they reversed and are now holding above support. If there is strength in the economy, then these commodity prices will hold at these levels.

There are a number of important sectors and industries that have chart patterns showing strength, and the chart below shows one of the best. Software stocks have formed a bullish base that is coiled and ready to break into new highs. This is a bullish indicator.

Here is another market sector challenging its former highs. It could move sideways for a bit before it is ready, but a new all-time high looks likely.

Here is another ETF ready for a new high. This looks good.

This sector has already broken into new highs.

This next chart demonstrates more new highs.

New highs can be seen for home builders, and a big breakout appears to be coming out of a six-month base for building and construction. These are further bullish indicators.

More new highs are shown in the chart below. These sectors are defensive, but who can blame anyone for buying these stocks after months of an inverted yield curve?

I've saved the best for last. The semiconductor chart remains bullish, although the stocks likely need more time to consolidate the strong gains.

Outlook Summary

• The short-term trend is down for stock prices.
• 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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