The Short-Term Trend Is Strong

It's a short-term uptrend. Strong uptrends often are characterized by weak opens, strong closes, such as Friday.


However, and this is a big deal, the number of new 52-week lows is elevated, and in addition, they increased from the previous day. You don't want to see an elevated and increasing number of new lows in an uptrend. The conclusion is that the short-term trend is showing a bit of strength. Also, this is a counter-trend rally within a larger downtrend.

The Long-Term Outlook

The ECRI Index tick lower yet again this week, although the pace of decline leveled off a bit. That might be splitting hairs, but this is the make-or-break level for this indicator.

If the ECRI Index turns higher from here, then the market could turn around and rally. But if the index continues to break down, I think it is inevitable that the market breaks down too. What if the ECRI index just holds at this low level? Then I am not sure what happens to stocks, but it is hard to imagine the market going significantly higher with such a weak ECRI Index.


If you are inclined to be bullish, I am sure you can find lots of bullish charts, and vice versa. But I think this chart below is one that is hard to argue with.

The 50-day average of new highs confirmed the rally into Jan-2018. And it did so convincingly. But then it fell off a cliff and showed an equally convincing non-confirmation into the Sep-2018 highs. And since then? It has only pointed lower.


Bottom line: I was negative on this market way too early. But now I am back on track, and I remain negative on this market until my favorite indicators start to improve.

Outlook Summary:

The long-term outlook is negative and continues to weaken.

The medium-term trend is down as of Oct-4.  
The short-term trend is up as of Monday Nov-26. 

The medium-term trend for bond prices is up as of Nov-16 (prices higher, yields lower).

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Disclaimer: I am not a registered investment advisor. My comments above reflect my view of the market, and what I am doing with my accounts. The analysis is not a recommendation to buy, ...

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