Signs Of The Next Short-Term Uptrend
It is still a short-term downtrend, but the PMO index is at the extreme low which means we are now on watch for signs of the next short-term uptrend.
On Thursday and Friday, the market found support and reversed higher. Friday produced a bullish outside day.
Stocks were in need of consolidation and got what was needed, at least in the short-term. Now with the momentum indicator at the lows, we have a good chance for a short-term rally.
The weekly chart below shows momentum in the opposite range. It looks like the larger-term cycle is at a momentum peak which means the next short-term up-cycle will be choppy and may be short-lived.
The signal that the cycle has shifted higher is when the number of new 52-week lows drops way down to a harmless level. My guess is that it will happen Monday morning.
The ECRI Index has stalled a bit here, and at a low level. It would be nice if it was just charging higher, but a bit of up-and-down is normal. I think it just means that the economy will continue to muddle along similar to the last few years.
In other words, the ECRI Index continues to be favorable for stock prices, but you have to own stocks that will do well in this type of weak-growth environment.
For me, that means sticking with the relative strength leaders and avoiding the temptation to try and predict the next sector to show out-performance.
Here is the latest sector strength spreadsheet. It really tells the same-old story well. The leaders are large-cap, growth and dividend-payers. Sound familiar?
Consumer stocks are in there among the leaders, and maybe Industrials. Health Care is a wild card. But I feel confident that Financials and inflation-sensitive stocks are not going to be leaders.
Also, this is not the time for foreign stocks. These dollar-denominated foreign ETFs are all under-performers and will remain that way for as long as the US Dollar continues to lead currencies.
For fun, here is the leveraged ETF spreadsheet. I am amazed that the Tech ETFs have not budged at all from their top positions. Impressive.
Maybe this spreadsheet is more than just fun. What a surprise to see the leveraged Financials ETF remain a leader after I just trashed Financials in the comments above. If XLF is not a leader, then why is FAS a leader?
Outlook Summary
The long-term outlook is positive as of Apr-12.
The medium-term trend is down as of May-7.
The short-term trend is down as of Apr-17.
The medium-term trend for bond prices is up as of Nov-16 (prices higher yields lower).
Investing Themes
Technology, Dividend-Payers
Strategy During a Bull Market:
- Buy large-cap stocks and ETFs at the lows of the medium or short-term market trends.
- Buy small-cap growth stocks on breaks to new highs in the early stages of market trends.
- Reduce buying when the market trend is at the top of the range.
- Take partial profits when the market uptrend starts to struggle at the highs.
- The cardinal rule is never invest based on personal politics. The stock market can do well regardless of which political party is in control.
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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