The short-term uptrend continues. Last Saturday I said we were very close to the next downtrend, so I am a bit surprised that here we are still looking for signs that the market is ready to turn down.

The short-term uptrend looks stronger now than it did last Saturday. Still, I know that when this PMO indicator is at the top of its range for a couple of weeks, it is time to be cautious, raise some cash and avoid adding to positions.

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The bullish percents began the week pointing lower, but abruptly turned higher again on Tuesday and then kept going. This is not the look of a market getting ready to turn lower.

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The NYSE bullish percent has retraced back to where it was in January which means that even though the index is pointing higher, this level of the bullish percent indicates caution.

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Here is a look at the NYSE bullish percent during the last bear market. As you can see, it moved from one extreme to another (although I do see a bullish pattern of higher high and higher low).

Based on this chart, my guess is that we get at least one more extreme low in the bullish percent before the market recovers its long-term uptrend. Of course, the two periods of time are different in many ways, so this is just a best guess. Plus, I really doubt there is anything shown in these charts that all of us don't already know.  The chances of another significant move lower are very high. Let's just leave it at that.

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The major indexes looked like they had been turned back by their 20-day averages, but then bullishly broke above.

Their 50-day averages are now in play which should be a more formidable challenge.

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This chart shows that just a simple stochastic indicates that some selling is likely soon. The 2900-level is the next resistance and it coincides with the 50-day.

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The 10-day Call/Put is starting to weaken which is an early sign that the next short-term downtrend may be near. It looks like people are just starting to buy puts to protect their holdings.

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The SPX momentum is very strong to the upside. Nothing here to indicate weakness.

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The Semiconductors were the bull leaders, they held up best during the market sell-off, and were one of the first to touch their 50-day average. Now they are showing a little weakness.

Another technical message is the declining 50-day which is usually more difficult for an index to breakthrough. It is much more likely that the SOXX needs to consolidate under the 50-day for a while before it breaks above convincingly.

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The charts aren't giving me a clear picture. I'm not very sure what the markets will do next week. However, based on the basic PMO indicator in the very first chart, I do know for sure that the lower risk period for buying stocks has passed and that now is a better time for taking partial profits than it is for buying stocks.

The Long-Term Outlook

The ECRI index hit a record low this week. It seems like it can only move higher from here, but it felt that way last week too.

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There are very few bulls which means that sentiment continues to favor higher prices from a contrarian point-of-view. However, in a bear market, this poll has far less significance than in a bull market.

I honestly don't know what to think. One day I'm pessimistic about the future and the next I am optimistic. But, I do know that we can't just sit at home for too much longer. We have to figure out how to protect ourselves while living our lives outside of the house.

Outlook Summary