EC A New Uptrend Already?

A new uptrend already? That was quick. A new short-term uptrend began on Friday, May 7, and I have now redeployed my available cash back into the market. Most of the purchases were among the stocks and ETFs that would benefit from inflation.

I should note, as I have for the last few weeks, that a new pattern has emerged in this PMO index that hasn't been seen for a long time. The index is unable to reach the top or the bottom of its range, and it is chopping around before it is ready to turn lower. This new pattern makes it a bit more difficult to buy the market dips and to know when to lighten up near the market highs.

The new short-term uptrend is confirmed by the SPX, which is above its five-day and is moving into a new high. 

I often mention that a new uptrend can't begin without the SPX above its five-day, and we saw that on Thursday with a very bullish close. Also, obviously, a downtrend is definitely over when the SPX hits a new high in bullish fashion, as it did on Friday. In addition, similar to the SPX, the Dow Industrials look particularly strong.

What about the Nasdaq? The weakness worries me, I don't like it. But I want to participate in this market, so for now I'm riding the uptrend by owning the NYSE stocks. Their strong price action is turning the short-term trend higher, but the Nasdaq weakness is narrowing total participation and we all know that narrowing participation often leads to market tops.

This is a convincing chart for the bulls and I should be showing it more often. The broader S&P-1500 index is into new highs, and so are both the cumulative advance-decline and cumulative up-down volume indexes.

In other words, the S&P-1500 price high is confirmed by two measures of market breadth which are also hitting new highs. I think if someone were to ask you to define a bull market, you could just show them this chart. But did someone say something about "narrowing participation?" I don't see it in this chart, not yet anyway.

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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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