The Short-Term Trend

The short-term uptrend continues, but it is weak. 

The 10-day Call/Put turned lower on Friday, so it seems as though the short-term uptrend might be stalling out already.

Technology is by far the most important market sector and it isn't cooperating. This group was very weak on Friday after looking quite healthy last Tuesday when it seemed ready to advance past the July buy-point. Still, the ETF is above its uptrend and support, so I may be over-reacting.

Defense stocks were very weak on Friday too, and this group doesn't look good short-term. The technicals here are pointing lower.

If you are looking for some explanation for why US stock prices trailed off this week, maybe this chart below helps.

The US Dollar has been selling off. The selling is only a few weeks old so it is too soon to call it a trend change, but it does look decisive. 

When the dollar is headed lower it means that foreign owners of US stocks are more inclined to sell, and this may be at least one reason why stocks looked so bad on Friday. 

Here is another look at the dollar but broadened to a 3-year view.

The Longer-Term Outlook

The ECRI Index ticked lower this week, but it is still above the zero-level which is my line in the sand between weak-growth and a sputtering economy. The graphic of the traditional LEI is below and it seems to confirm the ECRI of weakening leading indicators but with positive coincident indicators.

How to interpret this to help with our stock accounts? I think it says to stay cautious but hang in there for now.

I decided to stop trying to define the medium-term trend. It isn't helpful to me during this long market consolidation that started early in 2018. But I'll continue to watch the weekly charts, and at the moment I particularly like the one shown below.

The market is in a squeeze. Very soon we'll see these indexes either break down below the uptrend lines, or we'll see them break out above resistance and into 52-week highs. 

Some skepticism is still called for even if the indexes break to new highs since this happened in April and July only to see the breakouts quickly fail.

I am inclined to think that this week's selling of Technology is a continuation of the dramatic shift out of growth stocks and away from anything with a high price-earnings multiple.

A top for growth stocks in a bull market built on growth stocks seems to me like a huge event.

I continue to hold stocks but only because my indicators are telling me to do it. My pessimism is well established at this point. I am aggressively selling any stocks that are underperforming and moving into the top performers. This means I now have fewer Tech and Defense-related stocks, and more Utility and Dividend-paying stocks than I did last Saturday.

Side Note: There is a lot of talk about how the negative headlines are working against stock prices. My view is that the headlines aren't helping, but I tend to think this weakening trend for stock prices was established by traditional market forces beyond the control of newspapers, politicians and central banks.