The short-term downtrend continues with the PMO index at the bottom of its range, and the IBD Big Picture column considers the market to be under pressure. 

With this market weakness, we need to be alert for the signs that the market will start to tumble lower. However, the PMO has been down at the lows long enough that we also need to be alert for the signs of the next short-term uptrend.

A good place to start is with this basic chart. If the SPX slices below the 50-day on strong volume, and it continues to push lower then we have a larger correction to deal with. 

At the moment, the SPX is finding support at the 50-day, and that is a good sign. In fact, I think it would be okay if it were to dip down to support at about the 3280-level. After all, this market was very much in need of a healthy pullback so let's not freak out too much when it does what we said it needed.

Another place to look is at the number of new 52-week lows. To quote Mike Burk (link shown below), "really bad things don't happen to the stock market unless there is an elevated number of new 52-week lows".

The chart below shows that there was a day or two of elevated new lows on the Nasdaq a week ago, but since then the number has been harmless on both the Nasdaq and the NYSE. I think this is very good news for the bulls and it means to me that the current selling is the much-needed rest from the incredible run made by stocks since March.

Another sign that the market isn't ready to fall off a cliff is this strength in the Transports. This is a bullish looking chart.

This is the IBD 50 fund, and it has pulled back nicely to its support level. So far so good with this chart. If it breaks below this level in a serious way then we get a bit more worried.

You are probably thinking that I've cherry-picked a few of my favorite bullish looking charts to support my view. I'm guilty to some extent so let me present the best case chart for the bears.

Here is a bearish chart that does have me worried that my bullish view is wrong. This chart from Martin Pring shows that the balance of puts and calls is still far too heavily in favor of calls, and that is usually bearish for stocks. Let's hope that put buying continues to outpace call buying for a few more weeks to get this indicator back into the neutral range.

Of course, there is more you need to look at than just these charts but this is a good start. At the moment, I'm a buyer on the current dip in prices.

The Longer-Term Outlook

M2 is still growing but just not at its previous rapid pace. I believe this help support higher stock prices.

The ECRI index continues to point higher indicating improvement in the economy. This should help broaden out the number of stocks that will participate in the market rally.

Here is my last chart for today. The top panel shows six years of the SPX. I like to look at this type of chart occasionally as a reminder that the stock market goes up, down, and sideways within a much larger general uptrend. It is easy to forget. 

The bottom panel is the basic stochastic. It is a reminder that every year there is one or two really good medium-term buying opportunities and one of the buying opportunities often occurs sometime near October. 

We've had one good opportunity to buy this year in March and we are now scheduled for another. I'm not sure it will be October, but one is coming. Let's not overthink.

There are still too many bulls according to this poll. A dip nearer to 50% would be welcome.

I appreciate these guys now more than ever.

Outlook Summary

The medium-term trend is near the top as of Sep-12

The short-term trend is down as of Sep-03

The economy is in early expansion as of Sep-04

Contrarian Sentiment favors lower stock prices as of Aug-30

The medium-term trend for Treasury bonds is up as of Jan-25 (prices higher, yields lower) 

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

Trader Discipline

• Don't be afraid of corrections because they are opportunities
• Never invest based on personal politics
• Take pride in sticking to the trading plan
• Don't give in to fear, greed, or anger