The short-term downtrend continues, although the PMO has been at the bottom of the range long enough that we need to be looking for signs of the next uptrend.

The first thing to look for in a new uptrend is an SPX close above its 5-day average.

Second, look for a white candle in the10-day call/put ratio. This ratio sometimes turns higher before the market does.

Look for an RSI divergence such as the SPX index dropping below support while the RSI holds above the 35-40 range. Other momentum indicator divergences would work too such as MACD.

Also, look for the SPX to dip under the 50-day but then to bounce back up above the 50-day within a few days (a shakeout low).

Look for the SPX to drop in price while the VIX also drops as it did on Friday... our first hint of a bottom forming?

The Longer-Term Outlook

M2 growth perked up again last week. M2 growth favors higher stock prices.

The ECRI index just keeps rising. Now it is above the two-level where I think the economy is in expansion, and where we have a higher probability of success when we buy the dips.

We all knew the NDX had risen too far too fast. Let's not get too worried about this correction.

There is lots of talk about commodities lately. Are we at the beginning of a new super cycle for commodities and the stocks that mine for them? The gold miners have been top performers for a number of months, and now the copper producers are starting to look good. This chart of the price of copper is promising.

If you are thinking about buying companies that mine for gold or copper, you better also be worried about your bond portfolio because higher commodities prices puts upward pressure on bond yields (lower bond prices). A good line in the sand is the .725% yield for the ten-year Treasuries. If the 10Y yield rises much above this level, then the medium-term trend for bond prices has probably switched to a downtrend.

Still too many bulls. Let's hope the number of bulls retreats down below the 50%-level next week.

Outlook Summary

The medium-term trend is near the top as of Sept.12.

The short-term trend is down as of Sept. 3  -watching for a change in trend.

The economy is in expansion as of Sept. 19.

Contrarian Sentiment favors lower stock prices as of Aug. 30  watching for a change in trend.

The medium-term trend for Treasury bonds is up as of Jan. 25 (prices higher, yields lower)  watching for a change in trend.

Strategy During a Bull Market

• Buy large-cap stocks and ETFs at the lows of the medium or short-term market trends
• Buy small-cap growth-stocks on breaks to new highs in the early stages of market trends
• Reduce buying when the market trend is at the top of the range
• Take partial profits when the market uptrend starts to struggle at the highs

Trader Discipline

• Don't be afraid of corrections because they are opportunities
• Never invest based on personal politics
• Take pride in sticking to the trading plan
• Don't give in to fear, greed, or anger