Sorry I didn't publish any posts last week. I have been on vacation and out-of-town. I brought my laptop with me, and I thought I was going to have time to post, but it turned out to be a much busier vacation than I expected.

The short-term trend is up.

The PMO index is confirming.

The Long-Term Outlook

The ECRI index has now dipped below the 2% level, and the ECRI has stated that we should expect an "economic slowdown ahead".

M2 growth is also weak, and the combination of weak M2 growth and a weak ECRI index raises the caution flag for the long-term outlook for stock prices.

We've all been witness to the ability of stock prices to hold at high levels despite a shaky economy, so I don't think it makes sense to run out and sell stocks just because the caution flag is waving.

A better approach is to lower expectations a bit, and to keep in mind that the economic backdrop is no longer as favorable.

I will be watching the trend of small caps. If the small caps break down below these trendlines, then I will start to reduce the risks in my accounts.

And, as always, I will be watching the levels of the new 52-week lows for individual stocks. A lot of new lows is a bad sign for stocks while the major indexes are pushing upwards to record prices.

Summary

The long-term outlook is positive, but the caution flag has been raised.
The medium-term trend is down.
The short-term trend is up.