For the second time in several weeks, I have to mark my sentiment for the short-term trend as "uncertain." There was so much volatility this past week that the indicators weren't able to keep up, and as a result, I don't have a good feel for the trend.

Also, despite huge selling seen through Thursday, the PMO index never reached all the way to the bottom of its range, which is where I would feel more comfortable calling for a new short-term uptrend. Maybe we could see this tiny bit of strength in the PMO index as a bullish divergence? I'm not certain.

This chart definitely has the look of a new uptrend. On Friday, the major indexes opened at their 5-day averages, and they closed well above and at their highs of the day in a very bullish fashion.

The bullish percents showed positive action as they reversed off oversold lows and are pointing higher. However, they are well below the 5-day averages and are also below the big gap down seen on Thursday. This chart needs to see another day or two.

Junk bonds have been in a bearish downtrend, and it looks like this ETF may be forming a short-term bottom. But its closing Friday price hasn't broken above a very clearly defined downward trendline, and I could easily see this ETF chop around at the current price level for a few days before starting to trend again. A new short-term uptrend for this ETF certainly looks hopeful, but more time is needed.

The 10-day Equity-Only Call-Put ratio continues to point lower. This indicator is a good example of an indicator that is too slow to react to the current level of volatility. So, should we ignore it? Or is it telling us that the trend remains to the downside, and that Thursday and Friday's bullish price action was a trap and a counter-trend rally within a short-term downtrend that hasn't yet bottomed out? I don't know.

The charts of the small-cap indexes broke down and out of their bearish wedges, but then they bullishly found support at the prior lows. The price action looks surprisingly strong, but now they are near their downward sloping 50-day moving averages, and it is hard for me to imagine that they will rally more than a few days before prices start to struggle again.

The chart of the number of new 52-weeks is looking good. There was a huge spike in new lows on Thursday while the market sold off sharply, which is a traditional combination and an important signal to look for a meaningful short-term price low and reversal.

We got the dramatic reversal on Thursday. On Friday, we saw good upside follow-through, with stock prices sharply higher and a significant drop off in the number of new lows. It was exactly what to look for and obviously very bullish short-term, but it is still a day or two too early to call for a new uptrend.

On Monday and Tuesday, we need to see a further decline in new 52-week lows, maybe some weak overnight futures, but also strong price action during the day. 

I've included this chart of the SPX and NDX as a reminder to myself that, despite the strength in the market late in the week, both of the major large-cap indexes are below their 200-day averages. These longer-term averages aren't yet pointing lower, but they are getting close. Sharp rallies are typical in a longer-term downtrend.

I had a busy week and wasn't able to focus on the latest economic news from the ECRI, but I hope to get to it soon. My trading has been poor and undisciplined for most of February, which I'm not happy about, but I was able to make up for it this past week by trading properly into the textbook sell-off and reversal in the market.

Now, I am about 35% long, and the rest is in cash, which seems about right considering how unstable the world feels right now.  

Bottom line: The market is under the dark cloud of war, inflation, rising rates, and I'll add to that list - a huge debt burden. It is difficult to trade when the market could spike either higher or lower, so, for now, I think the best strategy is to hit for singles by taking profits quickly and to have a lot of cash.

This is my favorite area of the market at the moment. It looks like there is plenty of potential for it to continue higher as it comes out of such a strong base.

Outlook Summary

• The short-term trend is uncertain for stock prices.
• The economy is in expansion as of Sept. 19, 2020.
• The medium-term trend is down for treasury bond prices as of Jan. 3 (prices down, yields up).