The short-term uptrend continues. The market was really strong this past week, and the news was excellent concerning jobs and Pfizer's (PFE) new drug. So there is little to complain about other than the tiresome "overbought" market condition. Prices are definitely frothy and the comments on CNBC about the market are exuberant.

The market's strength shows nicely in this chart, with the major indexes solidly above their 5-day averages and with strong closes, except for just a bit of hesitation on Friday.

Junk bonds turned it around this week with very strong buying starting on Wednesday. Strong junk bond prices are usually a green light for higher stock prices. 

The small-caps found support at the 200-day and then broke straight up and out to new highs, but just as impressive is that the break out was from a huge base. This appears to be a bullish indicator.

The bullish percents are pointing decisively higher too, and they look like they have room to run higher still. Last week they showed some hesitation, but starting Monday, they got right back into the uptrend.

More of the same here. The 10-day Call/Put continues to point higher without any hints of weakness. 

Those guys at Investors.com got this one right. Let's give them the credit they are due.

One worm in the apple is this chart showing that the Nasdaq new lows are elevated. I will need to spend some time this weekend looking at the stocks on this new low list.

The number of weekly buying climaxes among S&P 1500 stocks was a bit worrisome, but mostly reflected weakness in the stocks hurt by the lower 10-year yield, such as this insurer shown below. Selling pressure among these stocks is expected.

However, when the scan is opened up to the broad market, the number of buying climaxes is elevated similar to the number of Nasdaq new 52-week lows. So a bit of investigation is needed.

If you aren't familiar with weekly buying climaxes, it occurs when a stock price exceeds the prior week's high but closes below the prior week's close, and an excessive number of these can indicate that the market is ready for another pause or pullback.

The chart below helps show why the current rally has so much strength. The lift-off that started about four weeks ago occured after a healthy pullback that washed out the excess and cleared the way for stocks to rally sharply.

Treasury yields are moving lower, and have been for a few weeks, which also helps explain the sharp rise in stock prices (or maybe this is the real explanation).

I believe that the market has accepted that short-term yields will be moving sharply higher soon and that this is pushing bond investors to buy longer-duration, which is pushing down those yields. And it also reflects a view that inflationary pressures will start to moderate as short-term rates rise. I know that it is controversial to say that inflation will moderate, but for now, that is what lower yields on the 10-year suggest.

So, at least in the short-term, we aim to invest in stocks accordingly by trimming the financials in favor of technology.

Here is another look at yields. Even the 2-year is now pointing lower.

This CNN Fear and Greed index does a really good job of showing short-term sentiment. At the moment, it suggests from a contrarian point of view that we might be a bit too enthusiastic about stock prices and that some profit-taking is likely to occur soon.

Bottom line: It is so hard to take partial profits during these great rallies, and sometimes you really get burned when the stock price goes parabolic. But, on balance, I think it is the right strategy to use. 

Outlook Summary

• The short-term trend is up for stock prices as of Oct. 8. 
• The economy is in expansion as of Sept. 19, 2020.
• The medium-term trend is down for treasury bond prices as of Sept. 23 (prices down, yields up).