The Start Of A New Short-Term Uptrend?

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The short-term downtrend looks set to continue, although the PMO has turned upwards again. With the PMO showing signs of perking up, the start of a new uptrend seems likely. However, with all the news about banking, and many other issues, I wouldn't blame you if your attention is more focused on preserving capital at the moment.

There has been impressive strength in the NDX lately, and so far it appears as though there is an average pullback in prices for the SPX. I suspect the strength in the NDX is at least partly a flight out of banks and into the large tech-related corporations with solid balance sheets and steady earnings.

That isn't a healthy market, so before trying to profit from the next short-term up-cycle, we need to see all three major indexes show short-term strength by rallying above their 5-day averages.

The bullish percents have pulled back to a point where it seems possible that they will level out. I'll be watching for signs of the next tick higher, particularly on the NYSE,

It was a rough week in the market, but the SPX held above support, and now it looks like it may settle down for a few days (maybe weeks) before breaking above the downtrend line. In addition, the momentum indicator has pulled back to a point where I wouldn't be surprised to see it turn higher.

The junk bond ETF chart looks similar to the SPX chart. The chart pattern shows a constructive pull-back into support, and momentum looks ready to curl higher again.

I think this is one of the better indicators to watch because it is tracking the market so well. I'll probably wait to see this summation index turn higher before declaring the start of the next short-term uptrend. Obviously, it is still pointing decisively lower at the moment.

The big news of the week was the collapse of the regional banks, but another major story was the breakdown in oil prices. This breakdown re-confirms the downtrend that was in question a couple weeks ago. What are the implications of this? For now, it points to weaker global economic growth, but it also helps ease the pressure on central banks to raise rates.

My guess is that in the short-term, it helps stock prices, but in the intermediate-term, it hurts stock prices. Lower oil prices probably confirm that rising rates are doing their job to slow economic growth, which will soon re-assert the bear market in stocks.

I'm amazed at the people recommending purchases of oil-related stocks based on the pullback in oil prices. It looks to me like the XOP is forming a major topping pattern. Money is coming out of energy stocks.

As you would expect during market turmoil, longer-term yields ticked lower over the past couple of weeks. But yields found support near the December-January lows, and even though the recent action shows sharp declines, yields are still within the range that started last September. If there is a breakdown below support next week, then we'll have a major bond market buy signal, and the implications would be negative for stocks and commodities.

I obviously don't have any special insights into the market at the moment. All of the comments I've made about these charts are basically a standard interpretation.

I'm a bear, and I continue to believe that the market is bouncing off the October lows and that the bear-market downtrend in stock prices will resume. I don't really know when, but I'm guessing this is a good year to sell in May. However, in both bull and bear markets, as always, the short-term cycles will continue.

Outlook Summary

  • The short-term trend is down for stock prices as of Feb. 9.
  • The economy is at risk of recession as of March 2022.
  • The medium-term trend is uncertain for Treasury bond prices as of Feb. 4.

More By This Author:

Too Much And Too Soon For A New Short-Term Uptrend
Approaching A New Short-Term Uptrend
Is It Too Late To Profit From The Short-Term Downtrend?

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

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