I’m still not sure what to think about the medium-term trend, but clearly the market is on a path that points higher as the weekly chart shows.

The Long-Term Outlook

This chart is a concern. The ECRI and the M2 growth rate have been ticking lower week after week. But then again, both have been falling from unsustainably high levels.

If the ECRI falls below the 2% level, then we get concerned. I should add that we get concerned if the ECRI dips below 2% and also continues to point lower.

Here is what I said last week:

If the ECRI holds above 2% or so, then I think the economy provides just enough growth to support stock prices. But below 2%, and the economy struggles, oil prices decline and there is downward pressure on stock prices.

Outlook

John Murphy has pointed out that it has been a year since the market has experienced a 5% correction so it is overdue for a pullback. Also, we are entering the risky time of the year for market corrections.

The long-term outlook is positive.
The medium-term trend is up.
The short-term trend is up as of July-12.