The SPX is pushing up against its highs again and it looks poised for a very important breakout. But this has been a difficult market for a number of weeks and you can't blame me if I say I'll believe it when I see it. Just look at the choppiness of the past two or three weeks in which every rally was quickly sold and every dip was bought. In addition, the number of new lows has been slightly elevated confirming the uncertainty shown in the SPX price.

While the market looks ready to break out, the PMO index shown in the chart below is pointing lower. This index is telling us that many stocks have lost their upward momentum in the last week. This chart looks to be indicating a new short-term downtrend, but I'm not going to call it because the other charts are not confirming.

The bullish percents of the two major exchanges are slightly at odds with each other. The NYSE is pointing slightly lower while the NASDAQ is pointing slightly higher, but over the last few weeks, they have moved sideways with no trend up or down.

The Summations are behaving just as you'd expect based on the charts above. They are basically moving sideways with a slight upward bias.

Even the advance/decline line is moving sideways.

Unlike the previous charts, the chart of the junk bond ETF JNK is pointing decisively higher, and, as a rule of thumb, if junk bond prices are moving higher then it favors higher prices for stocks as well. Bullish

Treasury yields have been cooperating quite nicely over the last few weeks. Yields have pulled back into levels that no longer seem to be working against higher prices for stocks.

After briefly issuing a sell signal on a longer-term basis, this chart of net new highs/lows is once again pointing upwards and giving us the green light to own stocks.

This very basic chart of the QQQ had a closing high on Friday and is looking quite favorable. So favorable in fact that it is difficult for me to see much to worry about. What's all this about a difficult market? Maybe we should throw out all the other charts and just look at this one? Bullish

This Pring global indicator is pushing to remarkable new highs. I'd be thrilled if this were the chart of a stock in my accounts.

Bottom Line: Based on the charts I've shown, the odds seem to favor higher prices. However, I remain quite cautious with about 10% cash and ready to quickly sell positions that aren't performing well.

One more chart to help if you are nervous about holding stocks. Despite the SPX challenging its price highs, sentiment remains skeptical towards owning stocks, and, from a contrarian point of view, this favors higher prices ahead. 

This internet index ETF FDN closed at new highs after a recent major break out. Bullish

This is probably the most important of the SPDR ETFs XLK to the general market. The market will go in the same direction that this ETF goes. And now, it is poised for a major break out similar to the SPX. Bullish

The gold miner ETF GDX has formed what could be this gigantic inverse head and shoulders bullish price pattern. And now, it could be getting ready to break out of what is a huge base.

The Europe ETF VGK looks like the next major fund to break to new highs.

If you can handle the volatility, this ETF ARKK could be a big winner after a terrific past week. 

Outlook Summary

The short-term trend is UP for stock prices as of Jan-15

The ECRI Weekly Leading Index points to ECONOMIC RECOVERY as of July 2023

The medium-term trend is Neutral for Treasury bond prices 

Strategy 

• Deploy cash by adding to stocks while the market is near its short-term cycle lows.
• Raise cash by partial sales of stocks while the market is near its short-term cycle highs.

Trader Discipline

• Corrections are opportunities
• Never invest based on personal politics
• Stick to the trading plan and don't give in to fear, greed, or anger
• Don't allow success to lead to overconfidence

More By This Author:

Big Market Movement In A Wild Week
The Short-Term Uptrend Continues; The SPX Reaches New Price High
A New Short-Term Uptrend Finally Appeared