Weekend Stock Market Outlook – May 02 2021

Stock Market Outlook entering the Week of May 2nd = Uptrend

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

ANALYSIS
The stock market outlook shows an uptrend in place to kick-off the month of May.

Technical analysis of daily SPX prices

2021-05-02-SPX Trendline Analysis-Daily

Another fairly flat week for the S&P500($SPX). We again start the week in basically the same position as the past 2 weeks: the index trading ~5% above the 50-day, roughly same distance to the lower trendline.

The ADX still shows a strong bullish trend in play. The index picked up another pair of distribution days last week, so the count is back at 5. Trading volume remains below average, so I’d guess it’s more a sign of profit taking than outright liquidation.

Technical analysis of daily SPX prices

2021-05-02-SPX Elliott Wave Analysis-Daily-Primary1

For Elliott Wave, I’m still not sure if the 4th wave ended. Price action remains weak; declining RSI, MACD, and a MACD crossover align with the flat price action we’ve seen lately. Hopefully you’re taking the opportunity to readjust your holdings.

COMMENTARY
So far, about half of the S&P has reported earnings, and by far the majority of those companies beat the estimates. That’s not too surprising, given how bad earnings were a year ago, but still a welcome sign. GDP is recovering, as is consumer spending (which accounts for ~70% of the U.S. economy). Stimulus checks may have helped…just a little. But even businesses were getting in on the act increasing their investment levels by 10% or so.

In other words, it appears the market’s are still in buy-the-dip territory if/when another correction comes our way.  Almost looking forward to it…almost.

Best to Your Week!

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Weekend Stock Market Outlook – April 25 2021

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

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

ANALYSIS
The stock market outlook continues to indicate an uptrend in place to start this week’s trading action.

Technical analysis of daily SPX prices

2021-04-25-SPX Trendline Analysis-Daily

A choppy week for the S&P500 ($SPX). We actually saw a small increase in volatility! Since the corrections over the past year have been ~5%, even a small amount of volatility can seem dramatic. But when all was said and done, not much change from last week’s starting point.

We start this week in basically the same position as last week: the index trading ~5% above the 50-day, roughly same distance to the lower trendline.

The ADX shows a strong bullish trend. A few more distribution days fell off the count, but a pair of distribution days popped up and took their place. The overall count is low, so nothing to be concerned about yet.

Technical analysis of daily SPX prices

2021-04-25-SPX Elliott Wave Analysis-Daily-Primary1

For Elliott Wave, it’s possible that the 3rd wave ended on the 16th, and the 4th wave completed last week, which would put the S&P into the 5th wave. The 4th wave could also drag on for a bit more.

Unlike the ADX and price/volume, EW is indicating there’s weakness underneath the price action last week, with the MACD joining the RSI in showing a negative divergence. This type of price action usually occurs during 5th waves (i.e. the end of an uptrend).

If the count is correct, that would mean the end of the Primary 1 wave…or the rally that started at the February low in 2020.

In either case, it’s time to start taking profits and/or right-sizing your allocations. The S&P gained a little more than 10% since the March low, and will likely give back half of that before the signals change.

COMMENTARY
The Biden administration got traders and investors hyperventilating last week, after proposing increased tax rates.  The proposal included:

  • Increasing the capital gains tax to 39.6% (currently it’s 20%) for those earning >$1 million per year
  • Increasing the corporate tax rate to 28% (currently it’s 21%)

The news shouldn’t have surprised anyone, but markets gonna market.  Biden campaigned on increasing taxes on the wealthy, and is making good on that promise.  Regardless of party affiliation, tax increases are inevitable.  All the stimulus flooding the economy will be paid for by someone.  And by someone, I mean tax payers.  The only difference is how the debt collection will be spread around…which tax rates increase and by how much.

There are still plenty of fundamental reasons to be bullish in the near-term;  an infrastructure bill in the works (more stimulus), low interest rates (lower debt repayment), and global vaccine rollouts (consumer spending). Earnings season rolls on, and most companies have reported better than expected results.  Again, not surprising given the comparison’s are based on the disaster that was Q2 2020.

Best to Your Week!

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Weekend Reading – Money and More – April 24 2021

Money

“The last time we saw such an upbeat zeitgeist that did not coincide with an immediate equity market correction was in 1999 when the dotcom bubble was in full bloom.”

“For now, the market trend remains bullish and doesn’t suggest a sharp decrease of risk exposures is required. However, we did take profits out of our index trading positions last Monday. Risk management is always a prudent exercise as markets can, and regularly do, the unexpected.”

And More

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Weekend Stock Market Outlook – April 18 2021

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

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

ANALYSIS
The stock market outlook shows an uptrend remains in place to start the week of April 18th.

Technical analysis of daily SPX prices

2021-04-18-SPX Trendline Analysis-Daily

The S&P500 ($SPX) continued higher last week, and sits ~14% above the 200 day moving average…again. It sits 5% above the 50-day, which is roughly the distance to the lower trendline as well.

The ADX rose above 20 for the first time this year, showing a strong bullish trend in place. A few distribution days still fall within the 5 week window, and even those remaining days don’t really reflect the recent bullishness.

Technical analysis of daily SPX prices

2021-04-18-SPX Elliott Wave Analysis-Daily-Primary1

The S&P in the third wave of a Minor 5 according to Elliott Wave counts. A negative divergence in the RSI popped up on Friday’s all time high.

COMMENTARY
Much like a shot of adrenaline running through our veins, the impact of stimulus checks has shown up in economic measures like retail sales, earnings, and inflation. We’re likely to see extraordinarily positive earnings this quarter (since Q2 2020 was so poor), and retail sales will also rise as the economy re-opens this summer, both of which are supporting of a rising stock market.

But inflation is also likely to spike, and the U.S. Fed has already stated that any near-term increase will be transitory. meaning they won’t do much of anything unless something really crazy happens (e.g. hyperinflation).

All these factors continue support further gains from the stock market this quarter, but don’t be surprised if we see some profit taking and/or sector rotation as investments hit overbought and oversold levels.

Best to Your Week!

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Weekend Reading – Money and More – April 17 2021

Money

“Risk, then, comes in two flavors: “shallow risk”, a loss of real capital that recovers relatively quickly, say within several years; and “deep risk”, a permanent loss of real capital.”

“Now is the time to make sure your Asset Allocation is such that you can tolerate the storm. If you wait until the storm is upon us, it is too late.”

And More

In 1050 AD, the Native American cosmopolis of Cahokia was bigger than Paris (Credit: MattGush/Getty Images)

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Weekend Stock Market Outlook – April 11 2021

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

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

ANALYSIS
The stock market outlook shows an uptrend remains in place to start the week of April 11th.

Technical analysis of daily SPX prices

2021-04-11-SPX Trendline Analysis-Daily

A strong showing for the S&P500 ($SPX) last week. The ADX shows a strengthening, bullish trend taking shape, and a few more distribution days fell outside of the 5 week window, improving the count.

In the minus column, trading volume hasn’t accompanied the rally higher, it’s trended lower. The S&P looks extended from the 200day again, but not from other technical trendlines. The old upper channel becomes relevant again would support additional headroom.

Technical analysis of daily SPX prices

2021-04-11-SPX Elliott Wave Analysis-Daily-Primary1

The Elliott Wave count remains the same as the past couple of weeks, showing the S&P in the third wave of a Minor 5.

COMMENTARY
Friday’s rally into the close put the Dow Jones Industrial Average, S&P 500 and Nasdaq 100 at all time highs. Word on the street is that lots of funds were shorting the market (because, you know, it hit 4000, a round number), and had to cover. Monthly options expire this Friday, so we could see an uptick in volatility in the very short-term. Longer term, market volatility continues to drop, seemingly supported by a buy the dip mentality.

Earnings season begins this week with some big financial firms releasing their Q1 numbers (e.g. JP Morgan, Goldman Sachs, etc.).

Best to Your Week!

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Weekend Stock Market Outlook – April 4 2021

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

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

ANALYSIS
The stock market outlook shows an uptrend in place to start the week of April 4th.

Technical analysis of daily SPX prices

2021-04-04-SPX Trendline Analysis-Daily

The S&P500 ($SPX) ended the shortened trading week higher, crossing 4000 for the first time ever. The ADX finally joined the other signals in bullish territory, and 3 more distribution days fell off the count.

Technical analysis of daily SPX prices

2021-04-04-SPX Elliott Wave Analysis-Daily-Primary1

The Elliott Wave count remains the same as last week, showing the S&P in the third wave of a Minor 5.

COMMENTARY
Last week, the Biden administration unveiled the “American Jobs Plan”, proposing $2+ trillion in new spending over the next 8 years, including:

  • $620 billion for transportation infrastructure (roads, bridges, transit, electric vehicles)
  • $400 billion for domestic manufacturing and workforce development
  • $400 billion for disability/elderly care programs
  • $300 billion for housing
  • $200 billion for expanded broadband and electrical grid improvements
  • $180 billion in research and development focused on clean energy

Our infrastructure could use the help for sure, so this package could do a lot of good if handled correctly (i.e. real improvements are made rather than pork barrel spending and pet projects).

The goal is to make the spending “revenue-neutral”, which is another way of saying tax hikes. Right now, that would be increased corporate taxes. Not quite as high as they were prior to the Trump administrations tax cuts, and still near all time lows, but an increase either way. The last round of cuts were largely absorbed via increased dividends and share buy-backs, so it’s not clear how the increases will be addressed.

Best to Your Week!

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