The short-term downtrend continues although the market decided to throw a party towards the end of the week.

The NYSE number of stocks above the 50-day has been declining for a week (confirming the PMO Index above) even though the NYSE Price Index has held steady. In my view, that is a signal to take partial profits and to raise some cash.

At this point, I don't think anyone needs to be told that the market has run-up to a level where it is in danger of a pullback. We all know it. Bullishness is frothy, valuations are high, etc.

So, I think we know for sure that the market is extended but we aren't entirely sure that selling is the right thing to do because this market could push higher and we could miss out.

However, in my case, the trade plan is always to raise cash into market strength even though there have been times that I missed out on some of the remaining gains. It's just that there have been so many more times where selling was the right thing to do. I think raising cash is the strategy with a higher probability of success.

In addition to when to sell, I have to decide what to sell. I was certain earlier in the week that I wanted a sizable amount of cash in my account, but I was just not sure what I should be selling. Should I hang on to the winners and sell the under-performers? Or should I be trimming the winners to capture the gains, and let the other holdings have some additional time to play catch up?

Since I couldn't decide, I raised cash from both categories of stocks. And now, I will raise more cash when this trendline is broken as shown in the chart below. From the looks of this toppy MACD, a break in the trend could be next week. But don't ask me yet what I will sell when the time comes because I don't know.

There aren't too many charts that I can find that cast much doubt on this bull market, but here is one to consider shown below. This average hasn't come close to its Oct-2018 high.

The Value Line Geometric Composite Index is an equally weighted index using a geometric average. Because it is based on a geometric average the daily change is closest to the median stock price change.

Here is a larger view of the same index. Is this index building a powerful base to push higher, or this a late-cycle divergence that reveals market weakness? I say it is the latter, but don't trade based on what I think. You'll lose money because I always see the negative in every chart. Instead, keep this chart handy and use any break of the support lines as a technical signal.

Despite the chart shown above, I upgraded the longer-term outlook to positive based on the strength of the ECRI Index shown in the top panel of the chart below.

Incredible outperformance by Technology and it just continues.

Software was very strong this past week after underperforming for a number of months.

Outlook Summary

The long-term outlook is positive as of Jan.11.  <-- recent upgrade

The short-term trend is down as of Jan. 4. 

The medium-term trend for the price of Treasury bonds is down as of Oct. 11 (prices lower, yields higher). 

Investing Themes:

Technology (IYW),  Semiconductors (SOXX), Software (IGV), Smart Infrastructure (GRID), Health Care Providers (IHF), Medical Devices (IHI), Clean Energy (ICLN), Solar (TAN)

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 because the stock market can do well regardless of which political party is in control