Weekend Stock Market Outlook

Stock Market Outlook entering the Week of February 21st = Uptrend

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

ANALYSIS
The stock market outlook remains in an uptrend, with prices now near the lower bound of a former bullish price channel.

Technical analysis of daily SPX prices

2021-02-21-SPX Trendline Analysis-Daily

The S&P500 ($SPX) sold off a bit last week, retreating from all time high’s.  It remains extended from support levels, so further selling is a possibility.

The ADX continues to show a weak trend getting weaker (it’s approaching a reading of 10 now). The Directional Indicators crossed over briefly last week, but are essentially equal to start things off this week. Two distribution days were added to the count, but two also fell off, so the price/volume signal remains unchanged.

Technical analysis of daily SPX prices

2021-02-21-SPX Elliott Wave Analysis-Daily-Primary1

For Elliott Wave, the 5th wave is looking for support at the 13-day moving average. During the 3rd wave (November to late January), the RSI didn’t fall much below 50.  If that trend continues, so should the 5th wave.  A move below 3870 indicates the 5th wave is probably complete and a larger decline is on the way.

COMMENTARY
While the media’s eyes and ears were focused on Congressional hearings related to recent short-squeezes, investors focused on the bond market; specifically the rapid rise in long-term interest rates. The rate isn’t that high, relatively speaking (1.3% is basically back to pre-pandemic levels, which is historically low to begin with). It’s the rapid rise that’s an issue (doubled since September).

The U.S. has experienced rapid increases before, so it’s not unprecedented. But it signals a shift in mindset; bond traders are expecting higher inflation. That’s not surprising, given the Fed would like to keep short-term interest rates low until there IS a sustained level of inflation. Add to that the expectation of a large fiscal aid package, and what’s actually surprising is that it took this long for those expectations to impact rates!

A shift in longer-term rates may shift some money around, but it shouldn’t derail the stock market entirely. If the Fed starts to move short-term rates to counter inflation, then we could see some fireworks.

Best to Your Week!

P.S. The 2020 Annual Performance Report should’ve been out last week; it’ll be out later this week.

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Market Insights from JP Morgan for 2021 Q1

Each quarter, JP Morgan Asset Management provides a ton of useful information via its “Guide to the Markets”:

“a comprehensive array of market and economic histories, trends and statistics through clear, compelling charts and graphs you can share with your clients.”

You can find this little gem on JP Morgan’s Asset management website, including a PDF and audio commentary.  Topics include Equities, Fixed Income, International markets, the U.S. economy, as well as alternative investments and investor behavior.


Source: JP Morgan Guide to the Markets: Q1 2021
https://am.jpmorgan.com/us/en/asset-management/adv/insights/market-insights/guide-to-the-markets/

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Weekend Reading – Money and More – Feb 20 2021

Money

And More

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Weekend Stock Market Outlook

Stock Market Outlook entering the Week of February 14th = Uptrend

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

ANALYSIS
The stock market outlook shows an uptrend, with prices near the upper bound of a former bullish price channel.

Technical analysis of daily SPX prices

2021-02-14-SPX Trendline Analysis-Daily

The S&P500 ($SPX) is within a bullish trading day of 4,000. The ADX shows a weak trend getting weaker.  Price/volume signal remains bullish, and leading high-growth stocks are acting well.  But declining trading volume as price reaches new highs remains a big concern, and suggests a lack of conviction from institutions.

Technical analysis of daily SPX prices

2021-02-14-SPX Elliott Wave Analysis-Daily-Primary1

For Elliott Wave, the 5th wave uptrend rolls on.  If symmetry with the 1st wave is maintained, the current wave should last a few more days before completing.

COMMENTARY
Still risk on…for now. By all typical valuation measures, stocks are extremely overvalued.

Shows extremely overvalued stock market

Source: Ned Davis Research (Hat Tip to CMG)

Not too surprising…where else are you going to park your money these days?  Even high yield (junk) bonds aren’t going to do it; yields sit at record lows!

Showcase junk bond yields over time

Hat Tip to CMG…again

Watch volatility ($VIX).  It’s still elevated when compared to the last few years, but nearing the low point of the since the pandemic sell-off.  I’d expect it to be closer to 12 before we see a major sell-off (>20%), but that doesn’t mean a minor one isn’t in the cards (<20%).

Shows volatility over timeBest to Your Week!

P.S. The 2020 Annual Performance Report should be out later this week.

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Weekend Reading – Money and More

Money

And More

2022 RS e-tron GT

2022 RS e-tron GT (Source: Car and Driver)

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Weekend Stock Market Outlook

Stock Market Outlook entering the Week of February 7th = Uptrend

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

ANALYSIS

The stock market outlook shows an uptrend, as stocks fought back against recent bearishness.

Technical analysis of daily SPX prices

2021-02-07-SPX Trendline Analysis-Daily

The S&P500 ($SPX) bounced off its 50-day moving average and ended the week at an all time high.  The ADX still shows a weak trend in place, but the directional indicators flipped to bullish on Friday (just barely). The price/volume signal shifted back to an uptrend thanks to Monday’s bounce and no new distribution days.

A look under the hood, and there is still cause for concern:

  • The index sits ~15% above the 200-day
  • Trading volume was below average all week
  • Trading volume declined as prices rose

Even though there’s an uptrend in place, keep watch.  Prices take the stairs up and the elevator down.

Technical analysis of daily SPX prices

2021-02-07-SPX Elliott Wave Analysis-Daily-Primary1

For Elliott Wave, the positive RSI divergence mentioned last week did indeed signal the end of the correction, which on a bit on the small side (only reaching the ~24% retracement level rather than the 38%). The long-term view continues to show substantial negative divergences in RSI and the MACD.

COMMENTARY
We got January’s unemployment report, which showed a decrease from 6.7% to 6.3%.  All is well, right?

Again, take a look under the hood.  The U.S. saw an increase of 49k was about half of what was expected.  And job losses in December were revised upward by 62%!  The unemployment rate fell because labor-force participation declined.

More than likely, this information bolsters the case for more fiscal stimulus, which will have a positive effect on the stock market. Infection rates are improving, as is vaccine distribution, so economic activity is likely to improve as well.

Best to Your Week!

P.S. Head on over to Epsilon Theory, read their take on the “Reddit Revolt”, and let me know what you think.

https://www.epsilontheory.com/hunger-games/

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Weekend Reading – Money and More

Money

“I could be wrong but I believe inflation will kill confidence. Inflation is the linchpin, the trigger. Inflation will kill the narrative that says the Fed has got our back.”

– Steve Blumenthal

“What happened last week IS Wall Street, and government regulators have ZERO interest in changing it…

The only worry regulators had was degrossing contagion and whether they needed to step in to ensure big financial institutions (including hedge funds) didn’t go belly-up from all of their suddenly excessive risk.”

– Ben Hunt

And More

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