Weekend Stock Market Outlook – July 25 2021

Stock Market Outlook entering the Week of July 25th = Uptrend

    • ADX Directional Indicators: Uptrend
    • Price & Volume Action: Mixed
    • Elliott Wave Analysis: Uptrend

ANALYSIS
The stock market outlook uptrend remains in place to start the last week of July, but have we rebounded too quickly from last week’s weakness?

The S&P500 ($SPX) sold-off, then recovered last week, appearing to end the selling shortly after it began. In total, the “sell-off” dropped prices just a bit over 3.5% in 3 days.  I hesitate to call it a “correction”. It’s more like normal volatility creeping back into the market action, since we recovered all of the loss and then some over the following 4 days.

Technical analysis of daily SPX prices

SPX Price Chart for the Week of July 25 2021

Technically, the long-term price channel ended thanks to Monday’s sell-off.  A new, short-term channel took its place.

The ADX made a quick, round-trip from bullish to bearish to bullish, highlighting the market volatility we just witnessed.  The SPX found support at the 50-day, but there’s a cluster of distribution days over the past few weeks (currently 6) which does indicate institutional selling at work and shifts the signal to mixed.

Technical analysis of daily SPX prices

SPX Price Chart for the Week of July 25 2021

Based on last week’s price movement, Elliott Wave seems to be showing that the 5th wave is still alive…just not the way I thought. The S&P dropped below 4300 in dramatic fashion, and then rebounded just as quickly. Basically that means the count wasn’t correct, because wave 4 low points can’t overlap first wave high points. After relabeling the 5th minute wave, the current count still shows an “old” uptrend in progress.

COMMENTARY
Earnings season is upon us, but COVID’s Delta variant, inflation, and Fed support are driving the narrative.

Speaking of the Fed and their “support” of the economy, Natixis recently surveyed investors on a large number of topics. One interesting data point was their long-term expectations for returns. Globally, investors expect their returns to exceed inflation by 14.5%! U.S. investors expect to beat inflation by 17.5%!

I couldn’t find the definition of “long-term”, but that’s a pretty impressive average no matter what time frame you use.  You can dig into the report here (https://www.im.natixis.com/us/research/2021-natixis-global-survey-of-individual-investors).

And while it’s less of an immediate concern here in the U.S., China’s renewed focus on regulating publicly listed companies (e.g. BABA, DIDI, for-profit education firms) could eventually reach multi-national corporations. Something to watch.

Best to Your Week!

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Weekend Stock Market Outlook – July 18 2021

Stock Market Outlook entering the Week of July 18th = Uptrend

    • ADX Directional Indicators: Uptrend
    • Price & Volume Action: Uptrend
    • Elliott Wave Analysis: Uptrend

ANALYSIS
The stock market outlook continues in an uptrend this week,but it’s not without some headwinds (and tailwinds for that matter) .

The S&P500 ($SPX) had an off week…if you can call something like a 2% decline an off week.  And the ADX and price/volume signals remain bullish.

Technical analysis of daily SPX prices

SPX Price Chart for the Week of July 18 2021

So we’re all good, right? Not so fast.  Over the past two weeks, the S&P collected a cluster of distribution days (4 of the past 9 sessions).  One of those days (last Wednesday) was something typical of market tops.

Even though the index closed higher than the prior day, it was actually a rare type of distribution day, “stalling”. Stalling days indicate selling into strength, verses buying it. Stalling occurs when:

  1. The closing price is in the lower half of the days trading range
  2. The closing price is higher than the prior day’s close
  3. Trading volume is higher than the prior day

Combined with the fact that many stocks with really good fundamentals are experiencing technical / chart breakdowns, we have reasons to be cautious.

Technical analysis of daily SPX prices

SPX Price Chart for the Week of July 18 2021

Elliott Wave is at an inflection point.  We may have just seen the end of the 5th wave or the end of the first part of the 5th wave.  If the 5th wave is still alive, then the S&P should remain above the wave iv low (just under 4300), assuming the Minute wave count is correct. As mentioned last week, the S&P has had waves extend several times previously, and there’s a lot of liquidity available to keep things moving.

COMMENTARY
The Fed repeated its stance that the current inflation readings are transitory, and while the recent recovery is progressing well, the central bank is still not to the point of withdrawing support.  China seems to support that notion, announcing its own version of QE last week.

Best to Your Week!

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Weekend Stock Market Outlook – July 11 2021

Stock Market Outlook entering the Week of July 11th = Uptrend

    • ADX Directional Indicators: Uptrend
    • Price & Volume Action: Uptrend
    • Elliott Wave Analysis: Uptrend

ANALYSIS
The stock market outlook continues in an uptrend this week, even with a slight spike in volatility.

The S&P500 ($SPX) sits at all time highs, with both the ADX and price/volume signals signaling a bullish environment.

Technical analysis of daily SPX prices

SPX Price Chart for the Week of July 11 2021

On the downside, the ADX is still below 20 (weak trend), and we did pick up another pair of distribution days (bringing the total to 4).

Technical analysis of daily SPX prices

SPX Price Chart for the Week of July 11 2021

Elliott Wave also remains in an uptrend, and looks like a corrective 4th wave took place last week (abc); a pretty consistent 4th wave pattern in this rally. If the 4th wave continues, we’ll head lower early next week, with the wave (i) high from mid-June the max decline. If complete, that puts the S&P into the last wave of the Primary 1.

The S&P has had waves extend before, and this count could be wrong, so there’s no guarantee the current uptrend ends anytime soon, 5th wave or not. But the Primary 2 wave will a bear market, whenever it starts, and could retrace the entire pandemic advance! Highly unlikely given all the “support” markets have these days, but still a possibility.

Since the market is up almost 20% for the year, there’s nothing wrong with taking profits and right-sizing your position and portfolio sizes.

COMMENTARY
All eyes were on the 10-year treasury last week, with the yield dropping back to February levels. That’s the opposite direction of the core inflation numbers, indicating that the bond market isn’t overly concerned about the recent spike in inflation…yet.

Best to Your Week!

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Weekend Stock Market Outlook – July 4 2021

Stock Market Outlook entering the Week of July 4th = Uptrend

    • ADX Directional Indicators: Uptrend
    • Price & Volume Action: Uptrend
    • Elliott Wave Analysis: Uptrend

ANALYSIS
The stock market outlook remains in an uptrend to kick-off the first full week in July.

The S&P500 ($SPX) continued to rally last week, adding further distance from it’s recent test of support.

Technical analysis of daily SPX prices

SPX Price Chart for the Week of July 04 2021

Both the ADX and price/volume signals remain bullish. The ADX trend strengthened substantially, while the number of distribution days decreased again.

Price now sits ~3% and 13% above the 50 and 200 day moving averages, respectively.

Technical analysis of daily SPX prices

SPX Price Chart for the Week of July 04 2021

Elliott Wave also remains in an uptrend, currently sitting in the the 3rd wave of the overall Minute 5, Minor 5, Intermediate 5, Primary 1, Cycle 3 count.

Technical analysis of weekly SPX prices

SPX Price Chart for the Week of July 04 2021

COMMENTARY
Employment dominated the news cycle last week, with the report hitting the so-called “Goldilocks” zone.  Basically, that means it had enough contradictory information to keep anyone from making changes.  The U.S. added more jobs than expected (Yea!), while the overall employment number rose (Boo!).

A short trading week in the U.S., with markets closed on Monday in honor of Independence Day.

Typically, this week starts that the summer trading season, with more volatility (i.e. “choppiness”) due to lower trading volumes.

Best to Your Week!

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Weekend Stock Market Outlook – June 27 2021

Stock Market Outlook entering the Week of June 27th = Uptrend

    • ADX Directional Indicators: Uptrend
    • Price & Volume Action: Uptrend
    • Elliott Wave Analysis: Uptrend

ANALYSIS
The stock market outlook flipped again early last week, heading into Monday’s session in an uptrend.

The S&P500 ($SPX) bounced off the 50-day moving average last week and rallied back to all time highs.

Technical analysis of daily SPX prices

SPX Price Chart for the Week of June 27 2021

The ADX directional indicators flipped on Monday. The ADX line itself remains far below 20, A few more distribution days dropped off the count, putting the total at 5 and 3 of those will drop off at the end of this week. Combined with a solid rally off the 50-day, the price/volume signal also returns to an uptrend.

Technical analysis of daily SPX prices

SPX Price Chart for the Week of June 27 2021

The S&P made quick work of the question about counts from last week, eliminating the possibility of a completed 5th wave and reaching a new, all-time high.

COMMENTARY
A lot of positive news on the political and economic front continues to support a “buy the dip” mentality.

The Federal Reserve announced that large banks had all passed the annual “stress test”, meaning they are free to restart dividend and/or share repurchase programs.

The Biden administration also reached an agreement on an infrastructure deal, covering ~25% of the “New Jobs Plan”. Let’s face it: any agreement is a positive step in what passes for political negotiations these days. But major market-impacting issues like corporate tax rates remain up in the air.

June’s preliminary Purchasing Managers’ Index (PMI) reading shows continued expansion in economic activity, in spite of labor shortages and bottlnecks in the supply chain.

Corporate credit spreads (the difference in yield between corporate debt and government bonds) hit their lowest level since 2008! Typically, spreads will widen sharply (referred to as a blowout) prior to any sharp decline in the stock market. Then again, government bonds don’t yield that much in the first place, so the bar is pretty low at this point.

And lets not forget that record low interest rates also allow market participants to use margin more cheaply than ever before…which they are happy to do, and is a great enabler for the current bull market.

Highlight the amount of debt investors are using

Investor Credit vs SP – Source: Advisor Perspectives

So it seems like a majority market participants have decided no one wants to “sell the news”.  Just remember that markets drop much faster than they rise, so the next major sell-off may feel more like a bungee-jump rather than an elevator ride.

Best to Your Week!

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Weekend Stock Market Outlook – June 20 2021

Stock Market Outlook entering the Week of June 20th = Downtrend

    • ADX Directional Indicators: Downtrend
    • Price & Volume Action: Downtrend
    • Elliott Wave Analysis: Uptrend

ANALYSIS
The stock market outlook uptrend switches to a downtrend to start the week of June 20th.

The S&P500 ($SPX) finally experiences some price movement last week; unfortunately for the uptrend it was to the downside.  The index broke through the support channel, as well as the 50-day moving average, on very high trading volume.

The quadruple witching day didn’t do the market any favors either, with more than $800 billion in options expiring.

Technical analysis of daily SPX prices

SPX Price Chart for the Week of June 20 2021

The ADX signal flipped to a downtrend mid-week. The index added 3 distribution days to the count while 2 dropped off.  With price closing below the 50-day on Friday and the count at 8, the price/volume signal also flips to a downtrend.

Technical analysis of daily SPX prices

SPX Price Chart for the Week of June 20 2021

Elliott Wave shows a corrective wave in progress. I favor the (ii) wave, verses the start of a the [2] primary wave. Either way, a close below 4061 would end the uptrend unless I’ve made a mistake in the count somewhere.

COMMENTARY
Last week, it was the Fed’s response (or lack thereof) to the prior weeks inflation data that made the headlines. They still see the current bought of inflation data as transitory, though they did increase their expectations for inflation this year. Pretty middle of the road stuff there, and similar to the views expressed here last week.

The Fed also adjusted their timeline for potential rate hikes, pulling them forward from 2024 to 2023. Plenty of runway for investors to make adjustments. And they avoided talk of “tapering” their asset purchases…probably keeping in mind the “taper tantrum” from 2013.

Touching the 50-day has been a buy the dip opportunity this year, but I’d want to see a couple of “higher lows” before doing so.

Best to Your Week!

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Weekend Stock Market Outlook – June 13 2021

Stock Market Outlook entering the Week of June 13th = Uptrend

    • ADX Directional Indicators: Uptrend
    • Price & Volume Action: Mixed
    • Elliott Wave Analysis: Uptrend

ANALYSIS
The stock market outlook uptrend remains in place to start the week of June 13th.

The S&P500 ($SPX) starts this week in roughly the same position as laset week, and the week before, and the week before that…~2% above the 50-day and ~11% above the 200 day.

Technical analysis of daily SPX prices

SPX Price Chart for the Week of June 13 2021

The ADX still shows a weak bullish trend in play, but the index didn’t see any distribution last week. The price/volume signal remains mixed though, as the total count still has a couple more days to work off.

Technical analysis of daily SPX prices


SPX Price Chart for the Week of June 13 2021

Elliott Wave continues to show an uptrend.

COMMENTARY
Inflation was on everyone’s mind last week, with the consumer price index (CPI) up 5.0% from a year ago. Core CPI, or the one without food and energy costs, rose 3.8%. Those are pretty steep numbers, even if they really are “transitory” like the Fed suggests. So far, the bond market appears to agree, as yields continue to drop.

The year over year comparison was always going to be dramatic, since economic activity was so depressed last year at this time. But reopening demand, combined with supply chains issues and shortages, is a recipe for higher prices regardless of economic starting points.

I’m assuming we’ll see a spike in inflation and then it will ease off a bit as supply chains get sorted. However, I think inflation levels remain elevated, and just “seem” lower when compared to the spike for year over year comparisons.

Best to Your Week!

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