Stock Market Outlook entering the Week of March 26th = Uptrend
- 20/50 Day Moving Averages: Mixed
- Price & Volume Action: Mixed
- Objective Elliott Wave Analysis: Uptrend
US markets sold off last week; with Tuesday providing a rare “outside-in” day on the S&P. This event is created by prices reaching both a higher high and lower low than the previous trading day (rare). It closed near the low AND on higher trading volume.
Speaking of rare events, the Tuesday price drop was 3 standard deviations larger than the average daily price spread for the last 50, 100, and 200 days. You have to go back to Sept 9, 2016 to find another drop that large. And on Sept 10, 2016 the market rebounded with an equally large move to the upside. That did not happen this week, which suggests the markets are weaker this time around.
The Russell 2000 is the first of the major indexes to enter a downtrend, closing below both the 20 and 50 day moving averages. All the other indexes ended the week mixed; below their 20 day moving averages, while finding support near the 50 day.
Price and volume action also deteriorated last week, with the Tuesday sell-off highlighting institutional selling across all sectors and increasing the number of recent distribution days to a cautionary level. Even the NASDAQ (a relatively strong performer lately) wasn’t immune, as it ended the week consecutive closing prices near the low for the day. Combined with higher volume creates “stalling” price action.
Of course, this doesn’t mean that the rally is over; rather, it’s time to review your holdings, take some profits, and consider selling stocks that are showing weakness.
OEW uptrend signal remains in place, while acknowledging the signal is likely to change if the uptrend doesn’t resume this week.
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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.