The major indexes are moving higher along the five-day averages in a bullish fashion, and I will continue to be bullish in the short-term as long as prices hold above the five-day average.If you are looking for signs of weakness in the short-term cycle, the first sign of trouble will be a break below the five-day, and the trend has been in effect long enough that my advice is to watch this chart daily.
Another chart to watch is this next one of the bullish percents. I’ll be raising a bit of cash (again) if these indicators start to weaken.
The momentum indicator of the SPX advance/decline line often produces some decent buy/sell signals, and I love an indicator like this one with smooth lines and clear cross-overs. At the moment, this indicator is pointing towards higher prices, but it is far enough above its midpoint that I would be cautious and ready to act when the indicator starts to roll over.
The junk bond ETF has continued to show a nice uptrend despite the somewhat worrisome selloff in late October. The rule of thumb is to trade stocks in the same direction as the price of junk bonds.This chart isn’t helping much with the short-term cycle, but it is giving a clear signal to own stocks. For me and my trading plan, it means that I should take partial profits and raise cash at the top of the cycle rather than get entirely out of stocks when the next short-term downtrend begins.
Last week, I mentioned that the one concern I had about stocks was that this buy-write index wasn’t confirming the uptrend in stock prices. The SPX was challenging new price highs while the buy-write index was still below the October high. Since last week, the buy-write index has improved a bit, but it is still well under where it should be if it wanted to confirm the uptrend.
The number of 52-week new lows on the NYSE is clearly at harmless levels. It has remained there for two weeks or so, and that is bullish for stocks. It is still worrisome that the number of Nasdaq stocks has remained elevated, and that fact may eventually undermine the market. But for now, I believe the favorable numbers on the higher-quality NYSE exchange appear to favor higher stock prices in general.
Bottom Line
I am about 55% long stocks and 45% cash. I will continue to add slightly to stocks that are performing well and trim the ones that are either extended or underperforming. I’m watching carefully for signs that this short-term uptrend is weakening because when it does start to weaken, I will capture profits and raise cash so that I can deploy it again back into stocks at the bottom of the next downtrend.
Outlook Summary
More By This Author:The Short-Term Uptrend Has Remained IntactThe Short-Term Uptrend Continues Despite IssuesA Nice & New Short-Term Uptrend
