Weekend Stock Market Outlook

Stock Market Outlook entering the Week of April 22nd = Downtrend

  • 20/50 Day Moving Averages: Downtrend
  • Price & Volume Action: Mixed
  • Objective Elliott Wave Analysis: Downtrend

COMMENTARY
We kick things off with a downtrend still in place, though there were some positive developments last week.

Price charts for $SPX,$COMPQ,$INDU,$NYA,$RUT,$VIX,$TNX,$USD,$CRB,$GOLD

2018-04-22 – US Stock Market Averages

All the indexes were above their 50-day moving averages by Wednesday, only to relinquish that level by Friday’s close.  Again, only the Russell 2000 is in positive territory using this indicator.  So we start the week in downtrend territory, with the prospect of an uptrend signal just ahead.

Price and volume action really is mixed.  On the positive side, the markets rose above their 50-day moving average, and it has been 11 weeks since the downtrend started.  This means that stocks have had a chance to form good price patterns and should be ready to breakout.  On the negative side, only 4 weeks have past since the second major sell-off in the latest downtrend, so some price patterns likely need another two weeks before their ready to go.  Also, all of the higher than average trading volume has occurred when prices have fallen.

Friday’s price action put OEW back in downtrend mode, removing the possibility that the latest moves were the beginning of a new rally.

2018-04-22 - SPX Technical Analysis - Daily

2018-04-22 – SPX Technical Analysis – Daily

The ADX indicator is unchanged from last week; the DI- remains higher than the DI+ (bearish), and the ADX line is flat.

S&P prices tested the upper trendline of the descending triangle, but were unable to breakthrough.  For comparison, the Dow Jones broke through the upper trend line of its own descending triangle last week; a good sign if you were trading that index.

2018-04-22 - SPX Technical Analysis - Weekly

2018-04-22 – SPX Technical Analysis – Weekly

Right now, the upper trendline sits just above 2,700, while the patterns floor remains at 2,581. At this point, the S&P would have to violate the longer-term trend (the rising price channel) in order to reach the floor; that lower trendline sits at ~2,600.

Earnings season has started up again and we’ve grown accustom to companies crushing analyst expectations. Anything less is now cause for panic sell-offs, so it’s a good time to review watch lists AND current holdings.

For growth stocks, I’m on the lookout for double-bottom price patterns. For income stocks, make sure the payout ratios remain within acceptable limits (i.e. less than 60%).


If you find this research helpful, please tell a friend. If you don’t find it helpful, tell an enemy. I share articles and other news of interest via Twitter; you can follow me @investsafely. The weekly market outlook is also posted on Facebook and Linkedin.

You can check out how well (or poorly) the outlook has tracked the market using past performance estimates:

For the detailed Elliott Wave Analysis, go to the ELLIOTT WAVE lives on by Tony Caldaro.  Charts provided courtesy of stockcharts.com.


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Weekend Stock Market Outlook

Stock Market Outlook entering the Week of April 15th = Downtrend

  • 20/50 Day Moving Averages: Downtrend
  • Price & Volume Action: Downtrend
  • Objective Elliott Wave Analysis: Downtrend

COMMENTARY
U.S. markets contended with the threat of an escalation in the Syrian War last week.  As of Saturday, threats of missile strikes turned into actual missile strikes.  We’ll see how markets respond on Monday.  For now, we’re still in a downtrend, but price action did improve last week.

Price charts for $SPX,$COMPQ,$INDU,$NYA,$RUT,$VIX,$TNX,$USD,$CRB,$GOLD

2018-04-15 – US Stock Market Averages

For now, all the indexes regained their 20-day moving averages, but most are below their 50 day moving averages.  The only exception is the Russell 2000, which begins the week above it’s 50 day moving average.

Price and volume action remains downtrend territory. We didn’t add any distribution days to the count, but trading volume declined as prices rose (not a good sign).

OEW analysis continues to indicate that the current downtrend may have bottomed, but price action remains choppy and hasn’t given the all clear yet.

From a technical standpoint, the S&P starts this week on better footing than last week. The S&P found support at the bottom of the descending triangle pattern, and is now looking to cross the 50-day moving average.

2018-04-15 - SPX Technical Analysis - Daily

2018-04-15 – SPX Technical Analysis – Daily

The pattern’s floor remains at 2581; the upper trendline now sits at 2725, give or take.  The ADX indicator is basically unchanged from last week; the DI- remains higher than the DI+ (bearish), and the ADX line is flat.

2018-04-15 - SPX Technical Analysis - Weekly

2018-04-15 – SPX Technical Analysis – Weekly

Moving to the weekly view, the S&P500 bounced off the price channels lower trendline during the week.


If you find this research helpful, please tell a friend. If you don’t find it helpful, tell an enemy. I share articles and other news of interest via Twitter; you can follow me @investsafely. The weekly market outlook is also posted on Facebook and Linkedin.

You can check out how well (or poorly) the outlook has tracked the market using past performance estimates:

For the detailed Elliott Wave Analysis, go to the ELLIOTT WAVE lives on by Tony Caldaro.  Charts provided courtesy of stockcharts.com.


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Weekend Stock Market Outlook

Stock Market Outlook entering the Week of April 8th = Downtrend

  • 20/50 Day Moving Averages: Downtrend
  • Price & Volume Action: Downtrend
  • Objective Elliott Wave Analysis: Downtrend

COMMENTARY
Last week’s market agitator came in the form of tit-for-tat tariff announcements between the U.S. and China.  What this week has in store is anyone’s guess.

All the indexes remain below their 20 and 50 day moving averages.  Prices continue to find support near the 200 day moving average, which is a good sign.

Price Charts for $SPX,$COMPQ,$INDU,$NYA,$RUT,$VIX,$TNX,$USD,$CRB,$GOLD

2018-04-08 – US Stock Market Averages

Price and volume action remains downtrend territory.  A look at the weekly chart (below) shows higher trading volume on down weeks versus up weeks since the start of 2018; definitely a sign of price weakness and institutional selling.

OEW analysis indicates that the current downtrend may have bottomed, but we still need to see an confirmation of the uptrend before changing the signal.

Revisiting the technical analysis from last week, in the daily view we can see a descending triangle pattern. This pattern is usually bearish, but let the price dictate your actions.

2018-04-08 - SPX Technical Analysis - Daily

2018-04-08 – SPX Technical Analysis – Daily

The pattern’s floor is the 2581.00 price level; watch for a high volume close below that level. Last Monday, prices actually dipped below 2581, but recovered by the end of the day to close at 2158.88 (whoa, that was close)! Alternatively, a close above the upper trendline (~2740 to start the week) would be very bullish.

The ADX indicator is basically unchanged from last week; the DI- remains higher than the DI+ (bearish), and the ADX line is flat.

2018-04-08 - SPX Technical Analysis - Weekly

2018-04-08 – SPX Technical Analysis – Weekly

Moving to the weekly view, the S&P500 crossed below the price channels lower trendline during the week. Thanks to a late-date on Friday, price closed above the lower channel, so the current bull market lives to see another day.


If you find this research helpful, please tell a friend. If you don’t find it helpful, tell an enemy. I share articles and other news of interest via Twitter; you can follow me @investsafely. The weekly market outlook is also posted on Facebook and Linkedin.

You can check out how well (or poorly) the outlook has tracked the market using past performance estimates:

For the detailed Elliott Wave Analysis, go to the ELLIOTT WAVE lives on by Tony Caldaro.  Charts provided courtesy of stockcharts.com.


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Weekend Stock Market Outlook

Stock Market Outlook entering the Week of April 1st = Downtrend

  • 20/50 Day Moving Averages: Downtrend
  • Price & Volume Action: Downtrend
  • Objective Elliott Wave Analysis: Downtrend

COMMENTARY
No April Fools joke here; data privacy continued to roil the markets last week.  While there was some positive movement on Monday and Friday, those gains weren’t enough to change the outlook heading into this week.

Price charts for $SPX,$COMPQ,$INDU,$NYA,$RUT,$VIX,$TNX,$USD,$CRB,$GOLD

2018-04-01 – US Stock Market Averages

All the indexes remain below their 20 and 50 day moving averages to start the first week of April. The 200 day moving average provided some technical support, but the indexes have more work to do to recover from recent price declines.

Price and volume action remains downtrend territory as well.  Last week’s gains came on lower trading volume, relative to the losing days

No update from OEW this week; the downtrend signal remains in place.

2018-04-01 - SPX Technical Analysis - Daily

2018-04-01 – SPX Technical Analysis – Daily

ADX price action moderated a little bit over the past week.  The DI- is still higher than DI+ (downtrend), but the ADX isn’t rising as sharply (weakening).

2018-04-01 - SPX Technical Analysis - Weekly

2018-04-01 – SPX Technical Analysis – Weekly

Taking a longer-term look, you can see the S&P500 break the upper channel of a long term trend as we started 2018.  This is typically a sell signal, or at the very least an indication that it’s time to take some profits.  True to form, the markets sold off, and are now testing the lower channel.  On the plus side, the index found support at the lower level 3 times this year, which indicates strong support at those prices.  On the downside, last week’s test came on lower than average volume.  Think of this as another data point on the current market conditions as you consider your investing strategy.

Best wishes to you on this Easter weekend.


If you find this research helpful, please tell a friend. If you don’t find it helpful, tell an enemy. I share articles and other news of interest via Twitter; you can follow me @investsafely. The weekly market outlook is also posted on Facebook and Linkedin.

You can check out how well (or poorly) the outlook has tracked the market using past performance estimates:

For the detailed Elliott Wave Analysis, go to the ELLIOTT WAVE lives on by Tony Caldaro.  Charts provided courtesy of stockcharts.com.


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Weekend Stock Market Outlook

Stock Market Outlook entering the Week of March 25th = Downtrend

  • 20/50 Day Moving Averages: Downtrend
  • Price & Volume Action: Downtrend
  • Objective Elliott Wave Analysis: Downtrend

COMMENTARY
Another quarter-point rate hike from the Fed paled in comparison to Thursday’s announcement of U.S. plans for intellectual property tariffs on up to $60 billion of high-tech goods from China. There’s a good chance the tariffs are a negotiating ploy, but that won’t stop knee-jerk reactions in the stock market. Technology stocks also faced selling pressure, associated with Facebook’s recent data privacy issues. For the week, the indexes lost between 5% and 6%, give or take.

All the indexes start this week below their 20 and 50 day moving averages, putting the moving average signal back into downtrend territory. The S&P rests on its 200 day moving average, with the other indexes within striking distance. Prior to this year, the S&P500 hasn’t touched the 200 day since the US election in 2016.

Price charts for $SPX,$COMPQ,$INDU,$NYA,$RUT,$VIX,$TNX,$USD,$CRB,$GOLD

2018-03-25 – US Stock Market Averages

Price and volume action also fell back into downtrend territory due to high volume selling during the week and prices dropping below the 50-day moving average.

OEW updated the wave count to reflect the sell off last week, putting the current signal back into downtrend territory.

It appears that the previous “uptrend” was really just a corrective “rally” in an ongoing downtrend.  As I mentioned last week, this type of whipsaw action is one of the reasons I’m looking for another indicator that is more accurate during periods of volatility.

2018-03-25 - $SPX Technical Analysis

2018-03-25 – SPX Technical Analysis

Last week, the ADX was showing a weakening bearish trend (DI- was higher than DI+ but the ADX was declining).  This week, we have a strengthening bearish trend (DI- higher than DI+ and the ADX is rising). Combined with a break below the 50 day moving average on higher volume (Monday’s price action), and a sell signal would have been generated on Monday.

After a week of selling, markets are usually considered “oversold”.  That’s not an invitation to buy, because markets can continue to sell off.  But be on the lookout for high volume buying when institutional investors cover their short positions and/or buy the dip. Until then, check your stops, cut your losses, and update your watch list with stocks that are resisting the current weakness.


If you find this research helpful, please tell a friend. If you don’t find it helpful, tell an enemy. I share articles and other news of interest via Twitter; you can follow me @investsafely. The weekly market outlook is also posted on Facebook and Linkedin.

You can check out how well (or poorly) the outlook has tracked the market using past performance estimates:

For the detailed Elliott Wave Analysis, go to the ELLIOTT WAVE lives on by Tony Caldaro.  Charts provided courtesy of stockcharts.com.


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As negative on stocks as Warren Buffett

A few weeks back, I mentioned that it was a difficult time to be an investor; stocks just seemed to go up and up, with little or no relationship to technical or fundamental data.

Several readers took exception to my statement, and wanted to know why I was so negative on stocks. I replied that I wasn’t trying to be negative. There just weren’t many stocks that met my criteria.

After reading this year’s annual letter from Berkshire Hathaway, I see that I’m not alone in my thoughts on the current state of the market. Page 4 of the letter states (emphasis added):

“In our search for new standalone businesses, the key qualities we seek are durable competitive strengths, able and high grade management, good returns on the net tangible assets required to operate the business, opportunities for integral growth at attractive returns, and a sensible purchase price.

The last requirement proved a barrier to virtually all deals we reviewed in 2017, as prices for decent, but far from spectacular, businesses hit an all time high. Indeed, price seemed almost irrelevant to an army of purchasers.”

Think about it. Warren Buffett had a hard time finding investments that met his investing criteria, and he’s one of the most positive people around when it comes to investing U.S. stock markets. Even prices for “decent” companies were too high!

For growth investing, I can relate this statement to criteria like sales, earnings per share, and institutional support.  Between stock buybacks and the search for yield, that army of purchasers went after everything, including companies with sales and earnings per share that were just “okay” by historical standards. In essence there was high pay for minimal performance…definitely not sensible.  You can even see this from a technical perspective, as prices were extended from proper bases and entry points when looking at the charts.

On the income side (particularly dividend investing), I can see things like competitive strengths, high grade management, and internal growth manifesting in a company’s ability to maintain dividend growth without expanding the payout ratio. Most of the stocks on my screen have no problem here. As with growth investing, the issue occurs when adding the requirement for a “sensible purchase price”. The P/E ratio is one way to evaluate whether stocks are priced sensibly, verses long-term historical norms.  Since almost all stocks that met my criteria also had P/E’s above 20, history says they won’t provide much cushion for riding out the next downturn (this was still true even after the February sell off!).

One thing is certain. The best time to buy stocks is when they are oversold; like after a bear market or some other disconnect between fundamentals and technicals (i.e. market crash). That is when the best stocks can be acquired for peanuts…and Berkshire will have a LOT of peanuts.

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Weekend Stock Market Outlook

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

  • 20/50 Day Moving Averages: Uptrend
  • Price & Volume Action: Uptrend
  • Objective Elliott Wave Analysis: Uptrend

COMMENTARY
The stock market outlook remains in uptrend territory to kick off the first week of spring.  All eyes will be on the U.S. Federal Reserve this week; another quarter-point rate hike is expected by the end of their 2-day meeting.

Most of the indexes remain above their 20 and 50 day moving averages.  The DJIA lags other averages, sitting below both those technical indicators.

Price Charts for $SPX,$COMPQ,$INDU,$NYA,$RUT,$VIX,$TNX,$USD,$CRB,$GOLD

2018-03-18 – US Stock Market Averages

Price and volume action also stays in uptrend territory. The distribution day count remains manageable. Note: Trading volume spiked last Friday on option / futures contract expirations.

OEW remains in an uptrend.  In a nod to the bulls, Tony no longer sees a massive sell-off anytime soon, stating:

After a January all-time high of SPX 2873, ending a strong 10-month uptrend. A drop of nearly 12% in two weeks followed. The perma-bears were back out in force. The crash they keep calling for has already occurred: 2007-2009. Those types of events only occur once in a lifetime. There will be bear markets in the future. But nothing like that for a very long time.

I’m looking for a potential replacement for the 20/50 day moving average; an indicator that works well when markets are volatile and/or extended from trending indicators such as moving averages. The Average Directional Index (ADX) caught my eye because it flashed a sell signal for the $SPX just ahead of the February sell off.  At the moment, it’s showing a bearish environment (DI- is higher than DI+) that’s weakening (ADX is declining).


If you find this research helpful, please tell a friend. If you don’t find it helpful, tell an enemy. I share articles and other news of interest via Twitter; you can follow me @investsafely. The weekly market outlook is also posted on Facebook and Linkedin.

You can check out how well (or poorly) the outlook has tracked the market using past performance estimates:

For the detailed Elliott Wave Analysis, go to the ELLIOTT WAVE lives on by Tony Caldaro.  Charts provided courtesy of stockcharts.com.


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