Weekend Stock Market Outlook

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

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

ANALYSIS
The stock market outlook remains in an uptrend this week, but is the current rally running out of steam?

Technical analysis of daily SPX prices

2020-06-21-SPX Trendline Analysis-Daily

The S&P ($SPX) rallied Monday and Tuesday, but price drifted lower afterwards. We briefly dipped below the upward trendline on Monday as well, but no enough to call it off.

The ADX Directional indicators crossed-over again, back into bullish territory, but the strength we saw two weeks back is gone. Institutional selling, in the form of distribution days, isn’t elevated yet, and price action in growth stocks remains strong. Friday’s massive volume was thanks, in part, to option expiration.

Technical analysis of daily SPX prices

2020-06-21-SPX Elliott Wave Analysis-Daily-Intermediate A

For Elliott Wave, I checked other possible retracement levels, and found 85.4%…interestingly, it overlaps the recent high on June 8th. That kicked off several discussions about the current count, the lack of divergence in the RSI/MACD, etc.

The uptrend signal remains in place to start the week, but let price be your guide.  I’ve seen a bullish count that put price targets for a 5th wave above 3393 (which would invalidate the Primary A wave count), and bearish counts that already have the S&P in the next leg of a downtrend (which would invalidate the Intermediate A wave).

Near-term, watch the June 8th high and the the June 15th low.

COMMENTARY
The big news last week came from the U.S. Fed, as they announced plans to purchase individual corporate bonds (versus their ETF purchases thus far) to provide more liquidity to the credit markets.

The drawback?  The risk/reward relationship for bonds is screwed up.  The Fed isn’t buying because they bonds are a good investment.  They’re buying bonds precisely because those bonds are bad investments.

Yes, this does continue to support “zombie” companies, but at the moment, employment is the more important concern.  But at some point, there will be consequences, and those consequences will impact people who can least afford it (i.e. people who rely on fixed income investments).

Best to your week!

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