A new short-term uptrend began on May 7, and the PMO index has quickly moved to the top of its range. This is where I usually start to get cautious about any new purchases.

I should mention, though, that this new short-term uptrend started in the middle of the range, and that they usually start with the PMO at the bottom of the range. So this cycle could play out a bit differently than most of the others.

A new medium-term trend started May 10 as shown by the moving average cross. Of the ten major indexes I monitor, all of them have now had a positive, bullish cross. 

In addition to the cross-overs, and this is probably more important, the number of new 52-week highs have increased to bullish levels while the new lows are down to harmless levels.

Plus, I like the setup in this chart. In January, the market ran up too high, so a lengthy period of correction or consolidation was needed before a healthy trend could resume. It looks like we had just about three months of correction which seems about right.

And one last comment for the bulls, the set up is also just right based on market sentiment. As mentioned in yesterday's post, the Newsletter Writer bulls are about 43% which is just where you want it to be when a new medium-term is starting. In other words, the sentiment survey confirms that the excessive bullishness has been flushed out.

What could go wrong with my bullish outlook? There is always the Mueller investigation, and I worry that one day there will be a headline that severely rocks the market.

In addition, it is very likely that the 10Y and 30Y Treasury yields will break out at some point soon, and I worry that this will cause Technology and Industrials to start heading lower again. Without leadership from these groups, I would expect the stock market to struggle.

One last thing for the bears. I don't like that this Packaging Index is not participating properly in this recent turn higher for the general market.

The Long-Term Outlook

The ECRI index is pointing higher, and the Small Caps are breaking to new highs. This favors higher stock prices.

Outlook Summary:

The market is looking really good right now, but I am nervous about the impact on stocks of the 10Y and 30Y Treasury yields which are both poised to break into new highs.

I am also nervous about the headlines swirling around the White House. The news keeps getting worse, and it just seems like a matter of time before one of these headlines gets close to the man at the top. I worry what the impact will be on the stock market if this happens.

The long-term outlook is cautious, but there are signs of improvement.
The medium-term trend is up as of May 10. 
The short-term trend is up as of May 7. 

The medium-term trend for bond prices is down.

Investing Themes:

Software

Medical Products

Oil, Gas

Wind, Solar

Cyber Security

Payment Processors

Small and Micro Caps

Strategy:

• Buy large cap stocks and ETFs at lows of the medium or short-term trend.
• Buy small cap growth stocks on break outs to new highs during the early stages of short-term up trends.
• Stop buying when the short-term trend is at the top of the range.
• Take partial profits when the uptrend starts to struggle at the highs.
• Never invest based on personal politics.