Stock Market Outlook entering the Week of February 7th = Uptrend
- ADX Directional Indicators: Uptrend
- Price & Volume Action: Uptrend
- Elliott Wave Analysis: Uptrend
The stock market outlook shows an uptrend, as stocks fought back against recent bearishness.
The S&P500 ($SPX) bounced off its 50-day moving average and ended the week at an all time high. The ADX still shows a weak trend in place, but the directional indicators flipped to bullish on Friday (just barely). The price/volume signal shifted back to an uptrend thanks to Monday’s bounce and no new distribution days.
A look under the hood, and there is still cause for concern:
- The index sits ~15% above the 200-day
- Trading volume was below average all week
- Trading volume declined as prices rose
Even though there’s an uptrend in place, keep watch. Prices take the stairs up and the elevator down.
For Elliott Wave, the positive RSI divergence mentioned last week did indeed signal the end of the correction, which on a bit on the small side (only reaching the ~24% retracement level rather than the 38%). The long-term view continues to show substantial negative divergences in RSI and the MACD.
We got January’s unemployment report, which showed a decrease from 6.7% to 6.3%. All is well, right?
Again, take a look under the hood. The U.S. saw an increase of 49k was about half of what was expected. And job losses in December were revised upward by 62%! The unemployment rate fell because labor-force participation declined.
More than likely, this information bolsters the case for more fiscal stimulus, which will have a positive effect on the stock market. Infection rates are improving, as is vaccine distribution, so economic activity is likely to improve as well.
Best to Your Week!
P.S. Head on over to Epsilon Theory, read their take on the “Reddit Revolt”, and let me know what you think.