Weekend Stock Market Outlook

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

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


The stock market outlook remains in an uptrend, despite last week’s weak price action.

The S&P500 ($SPX) continued to decline last week, but found support near the 50-day moving average.

Technical analysis of daily SPX prices

2020-10-25-SPX Trendline Analysis-Daily

The ADX flipped to a bearish trend ever so slightly (+DI = 24.11 / -DI = 24.73). That’s not enough to change the signal to a downtrend, but mixed is fair game. And it’s definitely something to watch early next week.

Price/volume is still green, and the recent declines haven’t been accompanied by distribution days. And a day or two of price increases on higher than average trading volume couldn’t hurt. Many technology stocks have good looking technical set-ups (think cups w/ handles), so it is a possibility.

Bearish and bullish Elliott Wave charts below. We’ll stick with the prevailing trend until one or there other is invalidated.

Technical analysis of daily SPX prices

2020-10-25-SPX Elliott Wave Analysis-Daily-Primary C

Technical analysis of daily SPX prices

2020-10-25-SPX Elliott Wave Analysis-Daily-Primary 1

With just over a week until elections in the U.S., the stage is set for a lot of volatility. On tap this week are earnings for almost 40% of the S&P 500, ongoing stimulus talks, and ever present coronavirus issues.

Global coronavirus cases continue to rise, with many countries hitting daily records. While that’s partly a result of more testing, the percentage of positive results also increased as have hospitalizations. Failure to pass a stimulus package (or a passing something that’s poorly received) and COVID shutdowns would be catalysts to the downside.

From a market perspective, there are fewer unknowns in terms of business and earnings impact versus February. We have better procedures and treatments in place, with several vaccine candidates in final stage trials. Passing a good package, a manageable case count, or positive vaccine trials should push the markets back to new highs.

Even though the signals are relatively bullish, it wouldn’t take much price movement for the outlook to get really bearish. So be prepared for volatility, and adjust your expectations accordingly. It’s unlikely we’ll know the results of the election on election night, but prices will tell you want to do.

Best to your week!

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