The short-term uptrend continues although it definitely didn't feel like it to me this past week. On Friday, the PMO index dipped and it looks ready to head lower, but I'm not quite convinced that the short-term trend is lower yet.

Here is another chart that has the look of a short-term downtrend starting, and this one is even more convincing since the weakness began last Tuesday.

Here is the chart that has me thinking the downtrend hasn't started yet. These indexes, particularly the NYSE, look like they are bouncing off their 20-day averages and are getting ready to move higher. If these indexes reverse and start to head lower early next week (closing below the Thursday intraday low), then it will be time to declare a new short-term downtrend.

The Long-Term Outlook

The M2 growth rate is pushing higher once again which favors higher stock prices longer-term.

Last week I thought the ECRI index had probably peaked and we could stop watching this chart every week. But now the index has perked up considerably, and up to a level that indicates economic strength that goes beyond the muddling type of growth we've been used to for a few years. This is very good news for stock prices longer-term.

I am including this chart just for fun so we can see how the ECRI index behaved during the financial crisis. The index bottomed before the SPX bottomed, and the index then pushed up to a really high level indicating that the economy was in the process of coming back to life. This index isn't perfect, but it can be helpful when you are trying to assess the strength of the economy.

I sometimes use the equal-weight SPX when looking at the market because it provides a picture of the market that isn't skewed by strength in the largest companies. At the moment, I think this chart is looking very bullish after coming back from a shake-out price correction in September. Now, the index looks like it is gathering steam for another leg higher. Because this chart is setting up so bullishly at the end of October (which is just before the seasonally strong period for stocks), and because it is just before a huge election, I think it is sending a very bullish signal for the winter months.

Outlook Summary

The short-term trend is up for stock prices as of Oct.1

Contrarian sentiment favors higher stock prices as of Oct. 1

The economy is in expansion as of Sept. 19

The medium-term trend for treasury bonds is down as of Oct.10 (prices lower, yields higher) 

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