Image Source: Pixabay

Last Friday's major market sell-off reversed on Monday, and now the SPX is re-challenging the highs. The chart looks good, and buyers of SPX will receive another buy signal with a close above 6425 or so. A close that breaks the uptrend line would be, to me at least, a partial sell signal, and a close under horizontal support at 6200 would be a signal for me to be out of the position.

The number of NYSE new 52-week lows remains just a bit elevated. Not enough to be overly worrisome, but enough to serve as a reminder that there is selling pressure behind the scenes, which isn't reflected in the price action of the major indexes.
 

The SPX regained the 21-day EMA on Monday, retested that level on Tuesday, and then pushed higher. The five-day average of total net new highs/new lows turned upwards very nicely on Friday, confirming the bullish price action of the SPX.
 

The two most important ETFs have recovered, although the SOXX fund looks weaker. I'd keep an eye on the SOXX because we need this index to perform well, or it will be yet another significant reason to be skeptical of this market, and we already have a lot of those to contend with. The XLK ETF, on the other hand, looks really good as it continues to lead the market to new highs.
 

Here is the chart that shows "the market" that I was referring to. The QQQ has already hit new highs. This is a bullish indicator.
 

While the charts of the SPX and NDX look terrific, the rest of the market has been a bit lackluster, as the chart below of the PMO index shows; momentum for the majority of stocks has experienced short-term weakness.
 

I covered my short ETF positions on Tuesday, and it turned out to be a good decision because those ETFs track the major indexes and not the broader market. And I bought a small position in bull market leveraged ETFs on Friday because, as the chart below shows, the five-day average of the total net new highs/new lows turned up nicely on Friday (also mentioned earlier). This looked like a decent entry point with a stop under the 21-day EMA, or perhaps under the Thursday close, as shown in the lower panel.
 

Here is a look at the junk bond ETF. This chart looks just about the same as the chart of the SPX, and as long as this chart looks good, I have added confidence in buying the dips in stocks.
 

At Investors.com, they remind readers that the SPX equal-weighted ETF often performs differently from the SPX market capital-weighted ETF, and that this past week provided the perfect example. The short-term trends that I like to watch and write about are basically represented by the RSP rather than the SPX.
 

In last week's post, I was quite bearish about the market because of the selling last Friday, and because a decent pullback in prices is so overdue, along with the difficult seasonal late-summer months for stocks.

However, I'm all about making money in the stock market rather than trying or insisting that I am right. So when stocks do the opposite of what I am expecting based on these charts, I swallow my pride and follow the direction of stocks as best I can rather than following what I said that I thought would happen.

Bottom Line

On Tuesday, I sold my inverse ETF positions, which left me with a substantial amount of cash to be deployed. I bought back some gold miner stocks on Tuesday, and I bought a small position in bull market leveraged ETFs on Friday.

I still have quite a bit of cash, but I'm reluctant to buy more of the leading stocks right now, so I will most likely be deploying cash into those bull market leveraged ETFs because those can be quickly sold if the market goes against me again.

Speaking of gold miners, here is a chart of the miners in the lower panel, and it shows a nice breakout. Now we just need to see the GDX hold above the 55-level or so. The inflation/deflation index shows that inflation-sensitive stocks have been ripping higher since June.
 

Here is a long-term chart of the GDX, which shows the price hitting new highs after 10 years or so. This looks bullish to say the least, but I am quick to sell the GDX when it falters because it can sell off and stay sold off for a long time.
 

Here is yet another picture of the GDX.
 

It's interesting to note that the miners are hitting new highs while gold itself is not. In years past, the associated stocks of a commodity would rally before the commodity, anticipating a price rise in the commodity. I don't know if that is still true.
 

Next, here is an interesting ETF. I own a small position and will be adding to it on any weakness. I'm not sure now is the right time to buy, but there may never be a good time. I don't know. These certainly seem to be the right stocks in order to participate in the AI industry.
 

This next ETF is similar to the one above. I'm not sure that right now is the time to buy, but based on the needs of the AI industry and the weak infrastructure of our country, this seems like a good area of the market.
 

Outlook Summary

• The short-term trend is down for stock prices as of July 11.
• The medium-term trend is neutral for Treasury bond prices. 

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