The short-term uptrend continues, but the market has struggled a bit over the last few days as shown below by the NYSE advance/declines.

Now I watch the SPX and a few other major indexes to see if they close below the 5-day average. Along with that, I monitor the strength of the bullish percents, the PMO index and the new 52-week highs/lows.

The new 52-week high/lows continue to look healthy, although the NYSE new lows have picked up just a bit.

Not shown is a chart of the bullish percents, but the story is similar with the NASDAQ looking stronger than the NYSE.

The PMO Index hasn't moved yet.

Sentiment

The Investor's Intelligence Newsletter Sentiment Survey is showing about 55% bulls as reported by VIX-Squared on Twitter. 55% is the range in which the market potentially starts to struggle over the medium-term. This means that, from a contrarian's point-of-view (and in my opinion), at the current level of bullishness in this survey, it is time to resist new purchases and consider taking partial profits.

I highly recommend paying attention to the Investor's Intelligence weekly survey. It has served me well for a long time. It isn't perfect and doesn't always work such as during extremely strong or weak market trends. However, most of the time, it provides very helpful market timing signals.

In general, when the number of bulls is below 45%, there is probably too much pessimism towards stocks which favors a period of higher stock prices. When the percent of bulls rises above 55%, it is in an indication that bullishness is starting to become excessive which works against stock prices.

The Long-Term Outlook

The sensitivity of the small cap stocks shown below help to assess the health of the general market. At the moment, these stocks have the favorable tailwind of historically low rates and a strong US Dollar which often favors small companies over the large ones.

The index is pushing to new highs, Very impressive, and it looks invincible. But I would say that it is probably getting close to the point where it needs to rest a bit and maybe retest the recent Spring breakout point?

The bottom line, though, is that with small caps looking this good, it favors higher prices for the general market longer-term.

The small caps continue to point us towards owning stocks, but there are other market influences that we have to assess. For instance, there a lot of negative headlines to worry about, but generally this stock market just takes the punches and then grinds higher. Very bullish.

I tend to think that the real issue facing stocks is higher rates which I really think is a dark cloud on the horizon. I don't have any special insights. I just know that in the past the tops in the stock market have been near the point of inversion for Treasury yields, and based on this chart below we are getting close enough to inversion that we at least raise a caution flag.

Added to the risk of rate inversion is the unknown potential for bad things to happen based on the truly scary annual Federal deficits. However, I am not entirely sure how these deficits will impact the yield curve. I suspect that whatever happens it will surprise us.

I really don't think I am going out on a limb by suggesting caution towards in the long-term based on rising yields and crazy levels of debt.
 

Outlook Summary:

The long-term outlook is cautious.  Higher rates and Federal deficits.
The medium-term trend is up as of May-10. 
The short-term trend is up as of May-7.On watch for the next short-term downtrend.

The medium-term trend for bond prices is down.

Investing Themes:

Technology

Medical Products

Cyber Security

Payment Processors

Small and Micro Caps
Gaming 

Strategy:

• Buy large cap stocks and ETFs at the lows of the medium or short-term trends.
• Buy small cap growth stocks on break outs to new highs in 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.