Friday looks like it marked the start of a new short-term downtrend.

The PMO for the broader market shows that the price momentum has weakened over the last four weeks which makes the market vulnerable for selling.

From the looks of this chart, I think we are entering a period where the short-term uptrends are weaker and shorter. The market needs some time to consolidate these huge gains.

In other words, we may be entering a period of weeks where trading the short-term trend will be more difficult. I probably will be less aggressive and hold a larger percentage of cash, perhaps as much as 25% even when the market is rallying.

The 10-day call/put ratio looks similar to the PMO.

The cumulative advance/decline never confirmed the new highs of the indexes.

The selling on Thursday and Friday looked serious and it was on higher volume. There were too many new 52-week lows for a healthy uptrend, and IBD counts 5 distribution days for the SPX.

I've been using this Bollinger Bandwidth indicator shown below more frequently because it seems like a good method for finding breakouts that are most likely to succeed. The narrower the width, the more likely that a new trend will continue. The wider the width, the more likely that the existing trend will weaken or reverse.

I would put this chart in the "highly likely to succeed" breakout category.

Let's see if these trendlines hold. The lows of January are likely support-levels for a pullback which means that the SPX trendline is in jeopardy.

All eyes are on this unemployment rate. A tick up towards that red line will get people nervous.

Eyes are also on this semiconductor index. Will it hold if the market pulls back?

Small caps are in focus again because of the strong dollar. Money flows into these stocks when the dollar rises. In my experience, it is usually temporary and it isn't a good reason to buy small caps. Like the charts above, holding this support is important for the general market's health.

So much of the world economy depends on strong oil prices. Watch the 50-level. A break down would not be good.

Side note, I am a strong believer that climate change due to carbon emissions is destroying our planet. So it isn't that I want strong demand for oil, but I am watching because weak oil prices are potentially negative for stock prices.

From a contrarian point-of-view, sentiment continues to favor higher stock prices in the medium-term.

Bottom line: I remain bullish because the charts are telling me that, but I will change my outlook the minute these indicators turn negative. I refuse to give back these gains. I haven't mentioned the virus because I don't know any more than anyone else.

One last chart. Here is a really basic look at the market over the last three years. Note to self... the best gains occur when the black line is rising. Go on autopilot and raise cash when it points lower.

Outlook Summary

The Presidential election is coming into focus. The months leading up to the election are probably going to be similar to 2016 where the market topped out early summer and then struggled until the day after the election. I think this will be a good year for the sell-in-May investment strategy.

• The long-term outlook is positive as of Jan. 11 (upgrade from weak-growth Oct. 5).
• Sentiment favors higher prices as of Feb. 7.
• The short-term trend is down as of Feb. 21.  
• 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
• The cardinal rule is never invest based on personal politics because the stock market can do well regardless of which political party is in control