Mike Burk made this comment today in his weekly review of the market:

The market has been following the average pattern for the 1st year of the Presidential Cycle pretty closely and that pattern turns positive in about 6 weeks.

That sounds about right to me. (I highly recommend reading Mike Burk every Saturday morning.)

Below is a look at the weekly, cumulative, net advance/declines. This chart does a good job showing the medium-term trend.

It just went negative, and a six week correction seems reasonable.

In the short-term, the market is oversold, and now I am looking for signs of a reveral higher. Maybe a short-term rally will start with some strength in the semiconductors? I just don't get the sense that this group wants to sell off yet.

The Long-Term Outlook

The ECRI index has stabilized, and at this level I think that we can expect economic growth, but it will be weak and choppy. In other words, nothing new.

The small caps are doing okay for now. Not inspiring, but still holding above support. IWM is a chart to watch though.

The M2 growth remains weak. This is bad news. Weak M2 growth is consistent with low inflation, low rates, weak growth.

The one thing that does concern me is this chart of the new 52-week lows. This is a lot of new lows, and Friday's new lows exceeded Thursday's on the NYSE (common stock only).

A significant pick up in new lows is not a good sign. It makes me nervous about the severity of a September correction.

It makes me nervous about the longer-term as well. I am reminded of the summer of 2007 when the number of new lows started to increase quite a bit.

Outlook

The long-term outlook is positive.
The medium-term is down as of Aug-10. Looking for a low mid to late September.
The short-term trend is down as of July-28. Stocks are short-term oversold.