The Short-Term Uptrend Surprisingly Continues

Obviously there are times when the market advance is so strong that the market just ignores the peak in the momentum indicator, such as April of this year. However, I think that it is generally a decent indication of when to be aggressive in the market and when to be a bit cautious.

Here is another look at the SPX equal-weight that does a better job showing the break out. I like the convergence of the moving averages as a signal of consolidation and opportunity. This chart makes the index look a lot more promising.

The chart below of the 10-day Call/Put ratio was one of the few that I showed last week that did not support my bearish view. It was just starting to point higher after trending lower for a number of weeks. The ratio continues to favor higher stock prices in the short-term, but I'm sure we would rather see a much stronger pattern, such as the reversal into an uptrend mid-May. I'll be watching this chart carefully next week.

The bullish percent indexes of the three major price indexes also seem to favor higher stock prices short-term. There is obviously a slow and steady increase in the number of stocks participating in the current rally, and there was a decent move higher on Friday, which is bullish.

Here is the chart that continues to make me uneasy about stock prices because there are too many new 52-week lows on the Nasdaq. But let's see if the number of new lows settles down below 50 early next week before making too much of this today.

There has been a lot of discussion on CNBC about the narrow participation during the stock market advance for the last few months. The red arrows in the chart below illustrate this by showing prices increasing and net advance/declines decreasing. Now, it looks as though the advance/decline ratio is showing just a little bit of life, although it still has a lot more work to do to be convincing.

The small-caps had a good showing on Thursday and Friday. Let's see if they can rally from here. The first step is to start to trade above the 50-day average.

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

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