Shorter-Term Trends And Longer-Term Outlook For Saturday, Oct. 26

The Short-Term Trend

The short-term uptrend continues. A week ago, it looked like the market was getting ready to move lower again in the short-term. But the market started to pick up strength mid-week and finished with a bullish Friday.

Here is a one year view of the SPX equal weight and it shows that the market has been experiencing very distinct short-term price-momentum cycles. If the trend holds then based on this chart we might get another few weeks of strength before the next pullback.

I've been trying to do a better job of incorporating volume into my Technical bag of tricks, so I have been tracking volume using the IBD method of counting distribution days. This chart below shows quite a few distribution days over the past five weeks. It obviously means that caution is called for in this market, but it always feels that way to me. Also, the market was strong on Friday but declined in volume from Thursday which is a negative.

Friday's rise in prices on lower volume is consistent with this chart below that shows the 10-day Call/Put declining, and this is another market negative.

What to think about this market short-term?It seems like we have more of the same from this market in the weeks ahead. A few more days or weeks of the current short-term rally that inches us up slightly higher, followed by a short-term decline that scares us but then bottoms out slightly above the previous cycle low. The bottoming of the market then sets us up for the next short-term rally.

If we play it right by trimming holdings at the peak and then adding to holdings at the low, and if we are in the stocks and sectors showing relative strength, then we'll make money. But making money this way means we have to stick to the trading plan. No freaking out. We just follow the indicators.

The Long-Term Outlook

There is a rally taking place in many of the foreign markets despite all the bad headline news. The Nikkei has rallied past a buy point towards a 52-week high. Bullish.

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Disclaimer: I am not a registered investment advisor. My comments above reflect my view of the market, and what I am doing with my accounts. The analysis is not a recommendation to buy, ...

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