Stock Market Outlook entering the Week of August 11th = Downtrend
- ADX Directional Indicators: Downtrend
- Price & Volume Action: Downtrend
- Objective Elliott Wave Analysis: Downtrend
More selling last week, so no change in the market outlook. The ADX and OEW remain in downtrends. Price/volume action shifted from mixed to a downtrend with prices below the 50-day moving average.
2019-08-11 – SPX Trendline Analysis – Daily
The S&P 500 ($SPX) broke the long-term trendline we’ve been plotting. Those key support levels, which I expected to provide some price support, never came into play, as price gaped below those levels to when markets opened. By Friday, prices recovered significantly, but still met resistance at the 50-day moving average. At least the selling was on lower volume.
2019-08-11 – SPX Trendline Analysis – Weekly
In the weekly view, the plotted trendline actually remained intact, with prices almost back to where they closed the week prior. You can also see the elevated selling activity, which sits in contrast to the April-May correction.
On average, S&P performance is at its worst in August and September. So probability favors negative market action until the start of Q4. Furthermore, news (more specifically news on Twitter) is increasing volatility, and there’s no shortage of potential market-moving players.
In the States, the U.S.-China trade-ware has been the noisemaker lately, and rightly so, but there are many other geopolitical issues lurking beneath the surface: Hong Kong, North Korea, Brexit, negative yield and ballooning corporate debt levels globally, Iranian ship seizures, economic contractions in Europe (don’t call it a recession – we don’t have those any more), etc.
What can you do?
Always limit your losses, preferably 8% or less. Admit the mistake, analyze it, and move on. You may get another chance, with the same stock even, when the overall market turns around.
Always take profits, preferably 20% or above. You don’t have to sell it all, but prune your winning trades so that you have something to show for your hard work. Ideally, you can extract your original investment and let your profits run (i.e. play with the houses money).
And if you’re somewhere in between? Check the price action. Failing to hold key support levels (technical), or missed/lowered earnings (fundamentals) are reasons to get out early. At a minimum, set a stop-loss at your break-even.
If you find this research helpful, please forward to 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.
Charts provided courtesy of stockcharts.com.
If you’re interested in learning more about the relationship between price and volume, or how to find and trade the best stocks for your growth strategy, check out this book on Amazon via the following affiliate link: How to Make Money in Stocks: A Winning System in Good Times and Bad. It’s one of my favorites.
For the detailed Elliott Wave Analysis, go to the ELLIOTT WAVE lives on by Tony Caldaro.
Once a year, I review the market outlook signals as if they were a mechanical trading system, while pointing out issues and making adjustments. The goal is to give you to give you an example of how to analyze and continuously improve your own systems.
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