Image Source: The NYSE Index just keeps pushing to higher highs. This is impressive price action, and last week’s new high for the market was not at all what I expected considering the warning signs that I was seeing during last weekend’s review of the market. I don’t fight the market, however, so for now, I will just ride my accounts higher along with the general market, but with a close eye on the exit if needed.The PMO index ended the week by turning upward after only a week or so of sinking lower. I would be much more enthusiastic about a new uptrend if these short-term cycles were lasting longer, and if the PMO index had reached all the way down to the extreme of its range and stayed there for a few days before changing direction.The bullish percents turned upwards and are confirming the new short-term uptrend shown in the PMO chart.The Summations are also confirming the new short-term uptrend.This chart is making me happy. After a series of lower highs, both indexes are turning upward from a low level which I think provides a very nice market buy signal. This is a bullish indicator.The price of the junk bond ETF is still respecting its uptrend line, which is a bullish sign for stocks in general. The recent sideways price action of this ETF makes me think that it wants to pull back and break down below this trend line. If it does, that will be another caution signal for stocks, but let’s not make too much of it unless the selling moves the price sharply lower.Last week, I mentioned how bearish I thought it was that there were so many new 52-week lows while the PMO index was at the top of its range. I was worried about some serious selling last Monday, but fortunately, that did not occur. Now, as of Friday, NYSE new 52-week lows have settled down and are at harmless levels.There has been a lot of discussion about the recent strength of small-caps and how bullish it is for the general market. I can’t dispute that small-caps are pushing into new highs, and I do agree that strength in small-caps is a major plus on the side of stock market bulls. I’m not 100% convinced, but I don’t have any good arguments at the moment.The chart below shows 20 years of seasonality for the SPY. November and December are among the better months for gains, although I am a bit surprised that April and July are tied with November. The point is, though, that November is a good month to own stocks, particularly after being able to pick up many stocks while on sale during the weak August through October time period.Here is a look at three years of Treasury yields. These yields have had their ups and downs during this time period, but, for the most part, the yields have cycled up and down within a reasonable range. When yields are relatively stable like this, the stability creates a backdrop that favors owning stocks. The Technology ETF is looking healthy, although it isn’t leading the market, and it surprises me that stocks continue to advance without technology leading the way. However, the Semiconductor ETF is still below its 200-day average and it is in a downtrend. That’s not what we want from a market-leading group of stocks in a strong stock market, and I am worried about this. This is a bearish indicator.This sentiment index is currently show a reading of “greed,” and I generally want to be buyer when this indicator says “fear.” To have a greed reading at the beginning of a short-term uptrend isn’t a good sign, and it makes me think that the current uptrend may be short-lived. This is a bearish indicator.
Bottom Line
The market is in a new short-term uptrend, and the technical indicators are providing both bullish and bearish signals. The bears are worried about the semiconductors being in a downtrend, and that sentiment is too bullish. The bulls are saying that there is nothing that unusual about mixed technical indicators, seasonality is favorable, the election is finally done, new lows have settled down to harmless levels, junk bonds are still in an uptrend, Treasury yields are well within an established range, and small-caps are cooperating.The bulls do seem to have more going for them at the moment.After reviewing all the bull and bear arguments regarding stocks, what will I do with my accounts? First, I’m just going to do the same as I always do, which is to profit by selling a portion of my stocks to raise cash just before short-term downtrends, and then deploying cash back into stocks just before short-term uptrends. I deployed quite a bit of cash back into stocks on Wednesday, Thursday, and Friday.Second, I’m going to be mindful of the risks in the market and not worry too much about any missed opportunities to profit. Holding on to gains is the prime directive, and it means being cautious at all times.I review all these market indicators to help me determine how much cash I should be raising at the top of a cycle, and also how aggressive I should be while deploying cash at the bottom of a cycle.At the moment, I have about 10% cash, and I’m reluctant to deploy this remaining cash unless I see a real opportunity. I definitely will not be chasing any stocks that look extended, and I’ll be trimming the laggards.Meanwhile, this next chart continues to provide a green light for owning stocks longer-term.Here is a look at the cycles that yields are experiencing. At the moment, I would probably be a buyer of Treasuries because it looks to me as though yields are ready to cycle lower again. I’d use the horizontal lines as stop levels.Next, here is an ETF turnaround story that I like.
Outlook Summary
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