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The chart below of the PMO index has been showing a lot of choppiness since May, and it means that individual stock prices are not moving in the same direction the way they usually do. Individual stock price trends are somewhat out of sync. I've seen many brief periods of choppiness in this PMO index, but never for this length of time, which began about mid-May.

This chart is making it difficult for me to determine the short-term trend, which is what I use as the centerpiece of my trading strategy. In short, I like to take profits and raise some cash at the short-term trend peaks, and then redeploy the cash back into stocks at the short-term trend lows.

Based on the chart below, I think it is safe to say that most reasonable people would think that the market has been consistently trending higher since the SPX breakout in May, and perhaps sooner. This is a pretty good-looking chart with a clear buy signal, a well-defined uptrend line, and very nice confirmation from the on-balance volume indicator.

How to reconcile the chart of the PMO index above with the chart of the SPX below? It obviously shows that despite the strength in the SPX large-caps, there is still weakness in many stocks, particularly for smaller companies. I will continue to watch this chart daily, looking for a break below this upward trend line. I would raise a bit of cash if stocks could break this trend.

As a stock trader, does it really matter that the short-term trend isn't clearly defined? It matters a little, but it isn't that big of a deal.

Traders know that they have to adjust their strategies based on the market and how it is behaving. I've adjusted by giving my strongest positions more room to run higher, and by selling off the weaker positions.

It isn't as easy as it sounds because a number of the weaker positions, after being sold, start to perform, and I've been forced to buy them back. It isn't my preferred strategy, but I'm also not complaining. No one said trading was easy, and besides, with an SPX chart looking that good, no one should be complaining about the market.

Shown below is a chart of the junk bond ETF, which I'm still watching every day. On Thursday, when yields spiked higher, this ETF sold off hard and I thought, "now we are seeing some selling pressure in the broader market."

But the ETF found support exactly where it should, and it bounced back nicely along with the market on Friday. I continue to believe that trading in the direction of this ETF makes sense, and that as long as junk bond prices are doing decently, then there is a lot less risk of a significant, general market sell-off.

Here is a look at the SPX momentum indicator. This indicator gives me a general idea of when to lean toward buying or selling stocks. It is far from being 100% reliable, but it does provide a general idea of when to buy or sell.

Looking at this chart, despite the fact that I can't really determine the market's short-term trend at the moment, it really looks like the SPX is near a short-term stock price momentum peak. It doesn't necessarily mean to start selling stocks, particularly since stocks are so out of sync with one another. But perhaps it is a good time to be a bit more cautious.

Obviously, the more appropriate time to be an aggressive buyer is when the indicator is turning upwards from the lows. Also, we are now entering the August-September period, which is the most difficult seasonal time of the year for stocks.

The centerpiece of my trading strategy is to follow the market's short-term trend, but that strategy is on hold for now. While I wait for the stock market to show a clear short-term trend, I am buying and holding the best-performing stocks with the best fundamental scores.

The ECRI Weekly Leading Index continues to point higher, indicating that the economy is likely to be healthy over the next four to six months. I have been following this indicator for years, and it has served me so well. When it is above the 2-level, I breathe easier about the economy and assume that stock prices will generally trend higher. This means that I can hold on to positions longer and be a bit more comfortable concentrating positions.

Outlook Summary

• The short-term trend is uncertain for stock prices.
• The ECRI Weekly Leading Index points to economic recovery as of July 2023.
• The medium-term trend is uncertain for Treasury bond prices as of February 2023.

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The Second Week Of Market Uncertainty
Uncertain On How To Define The Short-Term Market Trend
The Short-Term Uptrend Continues As Things Get Interesting