The short-term uptrend continues, although the market has been treading water rather than moving upwards over the last few days. This has been a very dull, holiday trading week.

With the PMO index at the top of its range, and with the major indexes all trading below their 5-day averages, it is time to be looking carefully for signs of the next short-term downtrend.

The bullish percents of the NDX and SPX continue to point higher in a bullish fashion, although both are close to their previous peaks, which means that they might start to stall out soon.

The Call/Put stalled a bit on Friday but otherwise looked healthy for the rest of the week, and it is confirming the short-term uptrend similar to the bullish percents.

The NDX bullish percent shown above is looking good, but the NDX price index is resting a bit after a few days of a strong pre-Christmas rally. On Friday, it showed a bit of additional weakness and closed just below a buy point. All of the price action was with very weak holiday trading volume.

The small-caps have formed a 12-month flat consolidation, but with a false break out in November and perhaps a trendline breakdown. I can't really see this as a bullish price pattern. 

With the PMO at the top of its range, I shorted the small caps on Thursday and Friday as a hedge to protect my long positions. I thought it was a good spot to short because this ETF rallied off its low-support level right up to its high-resistance level. If the index breaks higher, I'll cover.

The small-cap growth stock ETF has a slightly weaker look than the chart above. For a couple of months, prices have been below the slightly bearish downward-sloping 200-day. This chart's price pattern looks more like a topping process occurring after a failed breakout.

The new 52-week lows continue to point to behind-the-scenes selling pressure in the market. Some people are dismissing the importance of the elevated number of new lows because they are occurring mostly among the small-cap Nasdaq stocks.

But, on Wednesday, there were a lot of new lows on both exchanges, not just on the Nasdaq. This is not good news for stock prices in general. My annotation for the NYSE in the chart below indicates that Friday's level of new lows was harmless, but I should emphasize that it was not harmless on Tuesday and Wednesday. I don't like it. Bearish.

Bottom line: This past week was one of the dullest holiday trading weeks that I can recall. Let's not try to conclude too much from such a dull week. At the moment I am about 25% cash, 25% short via bear 3x funds, and 50% long stocks and ETFs. I expect that by next Saturday I will have a higher percentage of cash as the market continues to weaken, but I am open to all possibilities and will adjust the cash level based on the signals I get from the market.

I have included the chart below as a reminder that regardless of the larger trend in the market, it always moves up and down within this short-term cycle. This means that when the PMO is at the top of the range, it is time to be watching for signs of the next short-term downtrend.

And when the PMO is at the bottom of the range, no matter how bad the market or negative the news, it is time to be watching for signs of the next short-term uptrend. In other words, the best to buy is with the PMO at its lows, and the best time to sell is with the PMO at its highs.

Outlook Summary

• The short-term trend is up for stock prices as of Dec. 21.
• The economy is in expansion as of Sept. 19, 2020.
• The medium-term trend is up for treasury bond prices as of Dec. 4, 2021 (prices up, yields down).