The short-term uptrend continues. A number of the short-term indicators that I follow looked ready to turn lower last Saturday, and the Saturday before that. So, every day for the last two weeks I have been surprised to find the indicators still pointing upwards. However, it doesn't really matter as long as I follow my own trading plan which is to do most of the buying while the PMO is rising and to take partial profits while the PMO is at the top of the range.

How have I done with my own trading plan in the last few months?

I can't say it has been my best effort. During the March decline, I tried to jump back into the market too soon and was stopped out. As a result, I was then timid at the lows, and I hesitated when the best opportunity was presented. So, it has been a lesson to follow the plan and not to try to anticipate turns in the market, but instead to wait for them.

Note to self. Read your own blog. Wait for turns in the market.

I am close to being back on track now. I did make a few purchases this week on really nice looking breakouts, but with small positions because with the PMO is at the top of the range which means the lower-risk buying opportunity has passed. Also, I am poised and ready to take partial profits on the large positions when those pesky indicators start to turn lower. That's the basic trading plan. Buy the dips and breakouts, then take some profits into strength.

You hear all the time that in a bear market, the indexes generally retrace about 50% of the recent decline, and then they start to falter before plunging lower again. I don't know if this is really true, but it sounds about right.

Well, the SPX has just retraced a little more than 50%, and it is now near a resistance level, so some choppiness in the coming week seems likely. 

I just listened to a podcast where the technician said that in her studies of past markets, the indexes need some time near the top of the retracement range in order to shift more of the bears to bulls before the next decline can begin. That sounds right too.

Here is another view of the same chart. The SPX has remained above its 5-day average for a couple weeks. If you are looking for signs of the next short-term downtrend, the first step is a convincing close of the SPX below its 5-day. You don't have a downtrend until and unless that happens.

The 10-day call/put index looked like it was heading lower early in the week, but then turned up and now looks decisively bullish again. This is a good example of why you can't rely on just one indicator.

One last chart for the short-term trend. This view of the market reminds me of a deep-sea underwater missile launch, and the missile just breached the surface of the ocean. This looks bullish but requires follow-through.

At the moment, my trading plan remains the same as always with the exception that I may be more aggressive with bearish 3x funds when the market signals the next short-term downtrend.

The Long-Term Outlook

This leading index has never been so weak in its history and it is hard for me to believe that the leading economic indicators could drop to this point and all the market does is decline significantly for a month and then everything is up from there.

However, I also know that when this indicator is ready to turn and march upwards, it is often a long-term buying opportunity. So I am trying hard to remain open-minded, and stick to my plan to be out of the market when it is headed south and back in the market when it is headed north. Also, to do this while ignoring my own sense of what the market should be doing.

It is difficult to reconcile the chart above with the chart below. This group seems unstoppable, and as long as it holds above this long-term uptrend, you have to remain optimistic about stocks despite the scary ups and downs in prices.

More later, but for now, here is a terrific tweet from Mark Minervini.

Outlook Summary

I do my best trading when I am patient and disciplined.

The economy is in recession as of March 28

The short-term trend is up as of March 24 

Contrarian Sentiment favors higher prices as of Feb. 7

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

• Never invest based on personal politics
• Take pride in sticking to the trading plan
• Don't give in to fear, greed or anger